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ACS, Leadscope Square Off

Intellectual Property: Arguments before Ohio Supreme Court may finally put to rest ACS’s fight with Leadscope

by William G. Schulz
September 12, 2011 | A version of this story appeared in Volume 89, Issue 37

Credit: William Schulz
Justices of the Ohio Supreme Court hear arguments during the ACS appeal in the Leadscope case.
Justices of the Ohio Supreme Court hear arguments during the ACS appeal in the Leadscope case.
Credit: William Schulz
Justices of the Ohio Supreme Court hear arguments during the ACS appeal in the Leadscope case.

The seven justices of the Ohio Supreme Court heard oral arguments on Sept. 7 in another effort by attorneys for the American Chemical Society to reverse decisions by lower courts in its intellectual property dispute with Leadscope Inc. ACS’s attorneys argued that, as a matter of law, ACS should not have been found liable for defamation and unfair competition and that the wrong legal standard was used by the jury for finding ACS liable for damages.

In its initial suit, “ACS brought claims with a substantial basis in law and fact,” said attorney David W. DeBruin of law firm Jenner & Block. The lower courts, DeBruin argued, incorrectly found that ACS had brought “malicious litigation” against Leadscope “based solely on a subjective intent to harm a competitor. That is where the Court of Appeals erred. There has never been an instance where malicious litigation has been found strictly on subjective intent.”

The Ohio attorney general had filed an amicus curiae brief supporting ACS in the case. David M. Lieberman, representing the attorney general’s office, said that, in its ruling against ACS, the appeals court had recognized a “tort of malicious litigation. That tort does not exist in Ohio. There is no reason for it to exist.” Lieberman said that such a finding would improperly deter litigants from using the courts out of fear of reprisals from counterclaims.

Leadscope attorney Alan L. Briggs, of law firm Squire Sanders, countered that malicious litigation was part of a finding by the jury and the appeals court that ACS had engaged in unfair competition. He noted that there are two types of unfair competition: malicious litigation and defamatory statements that harm competition. ACS was found liable for both, he said.

In its original suit, ACS—which publishes C&EN—alleged that the three founders of Leadscope, all former employees of ACS’s Chemical Abstracts Service division, used ACS’s intellectual property to develop, patent, and market Leadscope software products.

The Leadscope defendants filed a counterclaim, charging ACS with defamation, tortious interference with business relations, unfair competition, and deceptive trade practices. The trial court found in favor of Leadscope on all but the last of the counterclaims and awarded the company $26.5 million in compensatory and punitive damages.

At stake for ACS now is a judgment that has grown to more than $40 million. The society will have to pay that judgment if it loses the Ohio Supreme Court case and elects not to seek an appeal to the U.S. Supreme Court on First Amendment grounds.



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