In the wake of a multi-million patent malpractice verdict against Antonelli Terry Stout & Kraus LLP, a federal judge has imposed “temporary” financial restrictions on the Virginia-based IP firm. Protostorm LLC et al. v. Antonelli Terry Stout & Kraus LLP, No. 1:08-cv-00931 (E.D.N.Y.)
As discussed in our October 13, 2014 post, Protostorm LLC engaged the Antonelli firm to file a patent application on its behalf. Although the firm timely filed an international PCT application, it failed to designate the United States on the application and allowed the application to become abandoned. Protostorm’s officers testified they only learned that they had no patent rights to assert after they investigated a possible infringement by Google. In August 2014, a jury returned a verdict of almost $8 million in favor of the start-up company.
In the latest development in this case, Protostorm filed a motion to restrict the Antonelli firm’s spending. On October 29, 2014, U.S. District Judge Pamela Chen granted Protostorm’s motion and imposed a number of financial restrictions on the law firm.
In its order, the court prohibited the Antonelli firm from making any “transfers of monies or other assets except payments for operating expenses incurred in the ordinary course of business, such as to employees (including non-equity partners and of-counsel attorney), third party vendors, and the landlord, as well as a draw for each equity partner in the amount of $12,000.00 per month.”
In addition, the court ordered that all revenues in excess of the funds needed for permitted payments, “shall be placed in a special interest-bearing account, which shall be applied against the judgment in the event that Protostorm prevails” on pending post-judgment motions. The Antonelli firm also was ordered to provide Protostorm written monthly reports of receipts and disbursements. Furthermore, the court granted Protostorm’s counsel the right to audit the firm’s financial records.
The court stated that it would address possible amendments to the financial restrictions order pending its decision on motions for stay of execution on the judgment, which are currently pending. In addition to the jury’s damages award, Protostorm is seeking another $7 million in interest.