Partnering: One Size Does Not Fit All

Thursday, June 1, 2006 - 01:00

Editor: Would each of you tell our readers something about your professional experience?

Manishin: I am a partner at Kelley Drye & Warren and head the litigation practice group in metropolitan Washington, DC. My principal specialty is complex litigation involving technology issues, and within that I have a subspecialty of antitrust and IP issues. The case we will talk about with my client Telos and their General Counsel Mike Flaherty is an example of a complex IP case.

My path to Kelley Drye is a familiar one in legal practice today. After time at the Justice Department and Jenner & Block, where I became a partner, I joined Patton Boggs. There, a conflict involving United States v. Microsoft - a landmark case I was intent to work on - caused me to move to Kelley Drye. The firm's deep expertise in telecommunications regulation constitutes a tremendous complement to and platform for my practice.

Flaherty: I am the Executive Vice President, General Counsel and Chief Administrative Officer of Telos. I have been in-house at Telos for five years, and have served as outside counsel to Telos since 1994. Immediately prior to that I was a litigator in the Los Angles firm of O'Donnell & Schaeffer LLC and previously served as the general counsel to the Banking Committee, U.S. House of Representatives, where I was extensively involved in legal, regulatory, and investigative matters

Telos Corporation is primarily a U.S. Government contractor focusing upon information security with most of our employees having top secret clearance. We rely heavily upon the integrity and protection of our IP. The dispute on which we worked with Glenn Manishin involved a lawsuit brought by a competitor which considered itself to be Telos' chief competitor and alleged copyright infringement, violation of trade secrets and other related matters.

Editor: And the industry in which Telos and Xacta operate? What is the competitive environment like?

Flaherty: Telos, together with its wholly-owned subsidiary Xacta, generates about 95 percent of its annual revenue from the U.S. Government. Among the things we do is secure wireless, presently in use in Iraq and Southwest Asia, automated message handling that filters top secret messages on a need-to-know basis. Xacta software is an information assurance software that proactively monitors the security threats to our customers' systems. We also do credentialing for U.S. Government agencies. Over time we have evolved from being a traditional systems integrator to that of secure solution provider of both software and services.

Editor: In May of last year SecureInfo Corporation of San Antonio, Texas brought an action against Telos for infringement. Can you give us the background of this matter?

Flaherty: One functionality of our Xacta IA manager product deals with a similar functionality of SecureInfo, which is to test systems for compliance with recognized standards. Their system provides a static measurement, while Xacta provides a dynamic 24/7 process and provides a whole series of ways to automatically remediate. In any event, this one SI functionality was the primary focus of the alleged IP infringement.

Editor: And Kelley Drye, and specifically Glenn Manishin, was brought in by Telos?

Flaherty: We were hit with a TRO by SecureInfo, and it caught us off guard. I knew Joe Wilson, a very talented young attorney working at Kelley Drye & Warren, and he immediately recommended Glenn for this matter.

Editor: Can you take us through your litigation strategy on this matter?

Manishin: Because Mike and I both have considerable litigation and trial experience, we were able to communicate at a level that frequently eludes a lawyer and his client. In my experience, general counsel frequently have more corporate than litigation experience, and that can be a challenge. Not here. Our procedure usually had me making a recommendation that Mike would then discuss with his two associate general counsel and make a decision. With this case, the agenda and the schedule for making decisions were not entirely in our hands, so we were called upon to react to the other side's moves. It is important in a case like this to avoid having your strategy sidetracked by the need to respond to the opposition.

Editor: How did the litigation proceed?

Manishin: The case was filed in May of 2005. The plaintiff asked for a TRO and moved for a preliminary injunction simultaneously with its complaint. We were able to negotiate a standstill agreement which mooted the requirement for a TRO and then proceeded into expedited discovery to support and defend their request for an injunction. That was set for late September.

We spent most of the summer preparing for that hearing. On the eve of the injunction, the plaintiff sought to withdraw the motion and wanted our concurrence. We declined and indicated that we were ready to go to trial.

The plaintiff's claims involved some rather far-fetched theories under the Computer Fraud and Abuse Act and RICO - corporate espionage - and we moved to dismiss the complaint. A decision on that motion was issued in September, and ten of the 13 counts of the complaint were dismissed. Reconsideration was denied. The remaining counts - copyright infringement, violation of the Uniform Trade Secrets Act and detinue, which is a common law action of unlawful dominion over another's chattel - were still at issue when the case was settled.

Editor: And the counterclaim filed last November by Telos against SecureInfo?

Manishin: I think we got the plaintiff's attention by having most of its claims dismissed, which reduced the case to a run-of-the-mill copyright and trademark case. The counterclaim involved a discussion of how Telos proposed to protect its IP. Defending against claims, like those asserted by SecureInfo, that a corporation has behaved in an unethical and unlawful manner is one thing. Asserting a claim against a competitor for infringing on a patent is quite different and involves high stakes. We believed that it was a decision to be made by the company, albeit with our advice. Here, Telos decided that this plaintiff was not going to stop unless and until it took the offensive.

Flaherty: Litigation is a complex matter. It is outside of the normal path of communication within a corporation, and if the general counsel does not possess the appropriate authority - or stature - within the corporation, the lititgation is not going to be managed as well. I was fortunate in having the confidence of the board and the CEO and, as a consequence, the ability to make timely decisions without the typical bureaucratic delay. This flexibility was important since Telos is a publicly-traded company and required to make a series of securities filings, all of which had to be managed within the context of ongoing litigation. Glenn, and the resources that he brought to the table, was invaluable in this process.

In a case of this magnitude, it is not simply a matter of retaining a firm and turning everything over to them. There are too many constituencies to answer to, and Glenn was invaluable in possessing, in addition to his IP and litigation expertise, a sensitivity to corporate governance demands. Depositions, discovery, e-discovery and the like divert the attention of a large number of employees who have very little experience in such matters. To facilitate the flow of work and the sharing of resources, we dedicated Helen Oh, Associate Counsel, to the matter, and she worked extensively at their offices. Therese Hathaway, our Senior Associate Counsel, was very crucial in coordinating the litigation and corporate governance matters. This allocation of in-house legal resources was of great help to Glenn and his team in providing them institutional memory and timely access. This litigation turned one of our leading software developers into, as he says, a "professional testifier." This type of case is expert driven, and it was essential to deploy our technical resources.

The dismissal of 10 of the 13 claims originally brought is not a typical result. It resulted from a great deal of hard work on the part of Glenn and his team and our internal legal, domain, and expert resources.

Manishin: Mike's decision to dedicate Helen Oh to this case meant that not only did we have the benefit of Telos' institutional memory, but also the ability to utilize our lawyers in the most efficient way possible. I think that resulted in considerable savings for Telos. Mike also determined to utilize in-house counsel as the principal lawyer to attend all depositions, sort of as a "continuity editor," rather than a Kelley Drye lawyer, and that contributed to keeping the costs down as well.

Editor: During the course of the litigation Telos and SecureInfo executives identified several major partnership opportunities, and that served to push the parties in the direction of settlement and, ultimately, the announcement of a strategic partnership.

Flaherty: Yes. SecureInfo filed a $22 million suit against us and, as a consequence of a very well managed defense by our team, wound up joining us in a strategic partnership. But for the way in which the litigation was initiated, that should not have happened and, I think, both parties were damaged by this avoidable litigation. Our CEO and board of directors were very pleased with the result of our defense of the unfounded SI allegations.

Manishin: Part of the reason we worked well together was that we both had considerable experience with the process. Litigation is like a boxing match. You win some rounds and you lose some rounds. What matters is who has the most points with the judges at the end.

Editor: As you know, one of the themes of our publication is partnering between law firms and the general counsel and members of corporate legal departments of their clients. Does one size fit all? Is there a particular partnering model that seems to work better than others?

Manishin: From my perspective as the provider of services, there is no one model. Each client is unique, and the one constant in any partnering relationship between the firm and a general counsel is trust. It is important, in establishing this trust, for outside counsel to attempt to assimilate the client's corporate objectives into his decision-making process. The allocation of employees from one venue to the other can be of great help in this process, as can bringing in expertise from outside both sides of this equation to address specific problems. But the real point, I think, is that one size does not fit all. What works in one setting and with one set of circumstances may be wholly inappropriate for another.

Flaherty: I agree. It is important for outside counsel to understand whom he or she is representing. One corporation may entrust considerable discretion - both financial and operational - in the person managing the relationship from the corporate side. Another may require approvals from different layers within the organization for any actions. I have worked in both environments. There are cultural differences from one company to the next, and there are cultural differences from one industry to the next. As Glenn says, it is trust that is the common denominator, and that must be earned during a fast-paced, difficult litigation process.

Editor: Is there anything either of you would like to add?

Manishin: Telos is a great company to work for. Although it is probably not in their interests to get sued again, I look forward to the opportunity to work with them, and with Mike Flaherty, in the future.

Please email the interviewees at gmanishin@kelleydrye.com or mike.flaherty@telos.com with questions about this interview.