Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP
673 F. App'x 107
| 2d Cir. | 2016Background
- Protostorm sued its former law firm ATS&K and individual attorneys for legal malpractice arising from failed patent prosecution and related conduct; a jury awarded Protostorm compensatory and punitive damages.
- Defendants (ATS&K, Brundidge, Bailey, Schiavelli) appealed the malpractice judgment and contempt finding; Protostorm cross-appealed on joint-and-several liability.
- ATS&K argued the underlying invention was unpatentable under 35 U.S.C. §§ 101 and 103 (relying on Alice), and challenged damages sufficiency.
- Brundidge raised statute-of-limitations and challenges to breach rulings and punitive damages.
- The district court found ATS&K (and Schiavelli initially) in contempt for making payments outside ordinary course of business after a freeze order; execution of the contempt award was stayed pending appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Patentability under §101 (Alice) | Protostorm relied on validity of its patent as a basis for malpractice damages. | ATS&K: invention unpatentable under §101 post-Alice, so malpractice claim fails. | Rejected as unpreserved: ATS&K failed to raise §101 in Rule 50 motions; §101 resolution would require further factfinding. |
| Patentability under §103 (obviousness) | Protostorm: patent valid for damages analysis. | ATS&K: patent obvious, so no malpractice damages. | Rejected as unpreserved for the same reasons. |
| Damages sufficiency | Protostorm: presented damages evidence supporting jury award. | ATS&K: damages not adequately proven as a matter of law. | Court upheld the jury’s damages finding; Protostorm’s proof was sufficient. |
| Contempt for violating freeze order | Protostorm: payments violated court order; contempt appropriate. | ATS&K/Schiavelli: payments were ordinary-course operating expenses. | Contempt affirmed as to ATS&K (payments not ordinary-course after firm ceased practicing); vacated as to Schiavelli (he was not managing partner when payments made). Execution of award not ordered. |
| Statute of limitations (Brundidge) | Protostorm: claim timely. | Brundidge: suit against him was time-barred. | Jury verdict on tolling/limitations sustained; sufficient evidence supported denial of time-bar defense. |
| Breach / jury instruction / summary judgment (Brundidge) | Protostorm: summary judgment and jury charge were proper. | Brundidge: district court erred in partial summary judgment and jury charge. | Most challenges waived or reviewed for plain error; district court’s partial summary judgment and jury instructions upheld. |
| Punitive damages (Brundidge) | Protostorm: punitive award appropriate given evidence. | Brundidge: punitive award improper. | Upheld: jury could reasonably award punitive damages on the record. |
| Joint-and-several liability (Protostorm cross-appeal) | Protostorm: Brundidge and Bailey should be jointly and severally liable with ATS&K for compensatory damages. | Defendants: not jointly/severally liable. | Cross-appeal denied: Protostorm waived the argument through counsel statements at trial. |
Key Cases Cited
- Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014) (legal test for patent eligibility under §101)
- Lore v. City of Syracuse, 670 F.3d 127 (2d Cir. 2012) (preservation of issues for appeal)
- Baker v. Dorfman, 239 F.3d 415 (2d Cir. 2000) (need for additional factfinding before deciding certain legal issues)
- Readco, Inc. v. Marine Midland Bank, 81 F.3d 295 (2d Cir. 1996) (when factfinding is required for legal determinations)
- Pittman by Pittman v. Grayson, 149 F.3d 111 (2d Cir. 1998) (distinguishing purely legal arguments from those requiring factfinding)
- Perez v. Danbury Hosp., 347 F.3d 419 (2d Cir. 2003) (standard of review for contempt findings and scope of contempt power)
- Rasanen v. Doe, 723 F.3d 325 (2d Cir. 2013) (plain-error review for unobjected-to jury instructions)