American Laywer October 2004 – The American Lawyer

Aptix Case

The American Lawyer October 1, 2004 SECTION: FEATURE; Vol. . 26.No. 10 HEADLINE: Blind Spots;

Amr Mohsen may have been the client from hell. He concocted fraudulent evidence to bolster his patent infringement suit and was indicted for perjury and obstruction of justice. Then he was charged with ordering a hit on a federal judge. Why did his topflight team of lawyers stick with him as long as they did?

BYLINE: By Susan Beck

BODY:

On June 13, Amr Mohsen met with a fellow inmate at the Santa Rita jail in Dublin, California, about 30 miles east of San Francisco. As the other inmate took notes, Mohsen spelled out a name: “A-L-S-U-P.” Mohsen described San Francisco federal district judge William Alsup. He wanted him dead.

The men discussed various means of murder. “Which is the least traceable?” Mohsen asked. A gas leak, the inmate suggested. Mohsen expressed concern that others might be killed.

The inmate said killing a federal judge was a big deal and would cost $25,000. “That’s very high,” Mohsen replied. “I heard it’s more like ten.”

Mohsen told the other inmate to have someone find out where Alsup lived and “what are his patterns.”

Fortunately for Judge Alsup, a 59-year-old former Morrison & Foerster partner, the Federal Bureau of Investigation was taping this conversation. Mohsen’s supposed accomplice [whose identity remains a secret] was ajailhouse

informant wearing a recording device. The FBI was also videotaping the two. On July 27 a federal grand jury in San Francisco indicted Mohsen for solicitation to commit murder and 22 other criminal counts. [The details of Mohsen’s conversation come from the government’s court filings.]

Mohsen is not a drug lord, a Mafia don, or a gang leader. Until this spring he was the founder, chairman, and chief executive officer of a San Jose company called Aptix Corporation. Considered a brilliant engineer and inventor, the 57- year-old executive owned a home in the exclusive town of Los Gatos, California, reported to be worth $10 million.

Mohsen’s connection to Judge Alsup began several years ago with a patent infringement suit that at first seemed little different from the thousands filed annually. Mohsen was backed in that suit by an A-team oflawyers from two of the country’s best litigation firms: Latham & Watkins and Howrey Simon Arnold & White. None of them could have predicted the ways in which this case would progress into one of the most bizarre and disturbing patent disputes, complete with forensic ink dating tests, mysteriously disappearing documents, and a dramatic last-minute withdrawal by counsel. Within this amazing case is also a tale of hard-nosed, combative advocacy blinding lawyers to the consequences of their client’s actions.

Although it appears that the Howrey and Latham lawyers never had an inkling that Mohsen might consider murdering ajudge, they repeatedly dismissed evidence of other crimes he was committing. Latham’s client, Mentor Graphics Corporation, which was bankrolling this patent litigation, could have walked away when Mohsen’s duplicity became obvious, but didn’t. The Latham and Howrey lawyers could have given more credence to the allegations of Mohsen’s misconduct, but didn’t. Ethics rules give lawyers a lot of discretion when they suspect, but don’t know for sure, that a client is lying. But in the heat of this litigation, fierce advocacy obscured the lawyers’ judgment and served their interests poorly.

It all started with an act of drudgery in the summer of 1998. Carlene Arnold, then a paralegal in the San Jose office of intellectual property boutique Lyon & Lyon, was doing what paralegals do-the unheralded task of sifting through stacks of documents. Lyon & Lyon represented Quickturn Design Systems, Inc., a Mountain View, California-based company that made something called a hardware logic emulation system. Computer chip makers use these systems to design and test chips. In February 1998 Quickturn had been jointly sued for patent infringement by Mohsen’s company, Aptix, and a Mentor Graphics subsidiary. Mentor and the subsidiary, Meta Systems, Inc., were represented by Latham partner David York; Aptix was represented by Howrey partner Robert Taylor. Both worked out of their firms’ Menlo Park offices.

As she looked at two documents in front of her, Arnold was puzzled. Here was a copy of pages from a 1989 notebook that Amr Mohsen had produced to show work he had done on the patent before it was filed with the Patent and Trademark Office. Mohsen had received his patent for a “field programmable circuit board” in 1996. Like Quickturn’s products, this invention was also a hardware logic emulation device, although it had different uses. It tested existing chips; Quickturn’s products were used to design chips that hadn’t yet been built.

In that 1989 notebook, Mohsen had written notes in longhand and sketched designs of his invention. But Arnold also had in front of her copies of that same notebook, which had been turned over by the lawyers who had filed Mohsen’s patent application [from the now defunct San Jose firm Skjerven, Morrill, MacPherson, Franklin & Friel]. The two copies-of the same notebook-should have been the same. But they weren’t. The version submitted by Mohsen was much more detailed than that turned over by the Skjerven lawyers; it contained additional notations and drawings that had been dated to appear as if they were written at the same time as the rest of the entries.

The Lyon & Lyon team, led by partner James Brooks, immediately suspected Mohsen of altering the notebook to bolster the strength of his patent. The earlier that Mohsen could establish he invented his system, the better his case would be. Under U.S. law, a patent is effective back to the “date of conception.” Other evidence fueled Brooks’s suspicions. To support a date of conception of July 1988, Mohsen had turned over in discovery a copy of a second notebook that had purportedly been created a year earlier. This notebook contained entries that were initialed and dated by Mohsen’s brother, Aly, a physician in Springfield, Missouri. [Inventor notebooks are commonly witnessed by  another person to corroborate when they were created.] The Skjerven lawyers had no copy ofthis earlier notebook in their files.

Brooks decided to confront Mohsen with these discrepancies at his deposition. The parties met in a Lyon & Lyon conference room the following August, with Howrey’s Taylor representing Mohsen and Latham’s York present for Mentor. Mohsen didn’t act alarmed when he was shown the two versions of the notebook. The engineer calmly described that after he had filed his patent application, he had added “clarifying” entries to the notebooks when he used them to explain his invention to potential investors, without properly dating them. He insisted he made these changes long before the lawsuit was filed and that he wasn’t trying to deceive anyone. “I didn’t believe it for a minute,” says

Brooks, who says a scientist would know better than to do this. At the deposition, Brooks asked Mohsen to turn over the original notebooks to his attorney, Taylor, for safekeeping. [The lawyers just had copies.] Mohsen refused.

Howrey’s Taylor and Latham’s York say they weren’t too concerned when they first learned of the discrepancies.

Taylor explains that the changes Mohsen had made “didn’t show good judgment,” but he didn’t think they demonstrated anything culpable. To York, Mohsen’s explanation seemed plausible. “At that time it didn’t seem like a big deal,” the Latham partner says. “He had a story for it. . . . My red flags didn’t go up.”

In the following months, however, as Taylor examined the documents more closely, he began to have doubts. “It was a hard story to accept,” he says. “It was not a terribly powerful explanation.” Still, says Taylor, “at that time I didn’t have enough basis to disbelieve.” Nonetheless, Taylor says he took steps to assure himself he was doing the right thing. “I was very careful to review each decision I made with the firm’s ethics partner,” he says. [He declines to reveal the advice because of client confidentiality.] York says he didn’t consult with Latham’s ethics partner: “It was not particularly high on our radar screen.”

Ethics rules leave lawyers a lot of discretion when they suspect, but do not know, that a client may be presenting false evidence. John Steele, a lecturer in legal ethics at Boalt Hall School of Law, says a lawyer may never offer evidence that he or she knows is false. But when the lawyer suspects, without knowing, that evidence is false, he or she can choose whether to offer it, under the American Bar Association’s Model Rules of Professional Conduct. In fact, lawyers should resolve doubts in favor of their client, under these rules. Steele, who is special counsel at the Redwood City, California, office of Fish & Richardson, says the rules don’t address a duty to investigate suspicions of falsity; the Federal Rules of Civil Procedure, however, do require lawyers to make an “inquiry reasonable under the circumstances” that their allegations have factual support.

The Lyon & Lyon lawyers had no doubts. They didn’t believe Mohsen. They wanted forensic ink experts to test the notebooks and attempt to date when the suspicious entries had been written. For months the two sides squabbled over this testing. Brooks, a 56-year-old former aeronautical engineer, was frustrated that Mentor refused to retreat in the face of what he thought was obvious evidence of fabrication. “This was a life-and-death battle for Quicktum,” says Brooks. “Quicktum was a one-product company. That’s all they did.”

In the fall of 1998, Brooks decided to get Mentor’s attention by filing an “abuse of process” counterclaim that demanded $10 million. [Alsup would later dismiss this.] Brooks says that in a phone conversation with York about this counterclaim, the Latham partner told him that if false evidence had been submitted, Latham would withdraw. “David said, ‘If we think something is wrong, we will back out,’ ” Brooks recalls. On October 7, 1998, Brooks followed up with a letter to York: “You should counsel Mentor to give serious consideration to withdrawing from this lawsuit and letting Aptix face the consequences of its own conduct,” Brooks wrote. York never responded, according to Brooks.

York says he doesn’t recall this phone conversation with Brooks, nor does he recall if he responded to Brooks’s letter. He does remember the letter, however, which he dismissed as mere posturing. “There was such a vituperative history in this case, it was hard to take seriously,” says the 57-year-old lawyer who served as an armored cavalry platoon leader in Vietnam. “Brooks’s letter was one in a long string of, ‘You are a bad person and your client is a bad person.’ Itwas par for the course.”

Brooks declined to respond directly to York’s statement, and simply said that the two sides had their differing views.

Brooks had directed his letter to Mentor’s lawyer because it was Mentor, not Mohsen and Aptix, that was driving this litigation. Mentor, based in Wilsonville, Oregon, makes software emulators, and desperately wanted to be a player in the hardware logic emulation business. But tiny Quicktum, the market leader in the small yet promising niche, held the key patents. In addition, in 1997 Quicktum had won an International Trade Commission action that barred Mentor’s French subsidiary Meta from importing its hardware emulator to the States. Mentor, which was roughly three times the size of Quicktum, struck back by filing three patent infringement suits against Quicktum in different courts, each challenging a separate patent. The company also embarked on a hostile takeover bid for Quicktum.

Mentor viewed Amr Mohsen and his patent as a useful tool in this fight. The Egyptian-born scientist held a doctorate in electrical engineering and applied physics from the California Institute of Technology. Mentor approached Mohsen with the following deal: Mentor would pay Aptix $1 million and loan it $3 million [which Aptix could repay with its stock]; in return, Aptix would license the patent to Mentor’s subsidiary, Meta, so that Meta could sue Quicktum. As the patent holder, Aptix would likely have to be a party to this litigation, and Mentor promised to pay Aptix’s legal bills. Aptix would share in any recovery, after the reimbursement of legal fees. The infusion of cash, modest as it may seem, was too tempting for Mohsen’s small, privately held company to turn down.

What’s not clear is why Mohsen would subsequently go to extreme lengths to try to win this lawsuit. Howrey’s Taylor claims his former client didn’t have much to gain, since his potential recovery would have been small if the challenge succeeded. So perhaps it was an inventor’s fierce pride, and not money, that led Mohsen astray. And far astray he did go-whatever the motivation.

By the end of 1998, Amr Mohsen’s story started to transform from strange to incredible. In December of that year, Lyon & Lyon associate Jeffrey Miller, who was overseeing the forensic testing for Quicktum, was preparing for a hearing in which the court would hear Quicktum’s motion to compel the testing of the suspect notebooks. At the day’s end, Miller headed to a restaurant for the firm’s Christmas party. There, Miller got a call from Howrey’s Robert Taylor. The Aptix lawyer told him the notebooks could not be turned over for testing. They had been stolen off the floor of Mohsen’s Mercedes. Miller was incredulous.

At this point Judge Alsup was not yet involved in the case. He took over in the summer of 1999 after the judge overseeing the litigation left the bench. The suspicious facts surrounding the documents quickly caught Judge Alsup’s attention. At Quicktum’s request, he ordered the parties to brief him on whether he should dismiss the entire case because of this “spoliation” of evidence. He set a hearing for February 2000 to decide whether to grant such drastic “tenninating sanctions.”

The bizarre twists continued. A month before the hearing, Mohsen claimed that a mysterious stranger had mailed him an envelope containing scraps from the stolen notebooks. “These were discovered lately in our backyard,” read an anonymous note in the envelope. “These look like important documents for you.” The Latham and Howrey lawyers continued to reject the notion that Mohsen might be misbehaving. In ajoint brief filed February 9, 2000, they mocked Quickturn’s claims that Mohsen was attempting to deceive the court as “absurd.”

The 65-year-old Taylor, a former patent examiner who is a fellow of the American College of Trial Lawyers, explains why he gave Mohsen the benefit of the doubt for so long. “He had nothing in particular to gain in this lawsuit,” the Howrey partner claims. If the infringement suit succeeded, Mentor would collect most of the damages. Mohsen, he points out, was just a pawn in Mentor’s pursuit of Quickturn.

Personality played a role, too. Latham’s York says Mohsen didn’t seem like a crook. “He’s a likable guy in person,” he says. “I did not get a sneaky feeling from him, like I do from some people. . . . He didn’t strike me as one of those guys we all see in our practice where you leave the building and say, ‘Oh, my God!’ “.

By this point, York admits that he realized the notebooks had lost any value as evidence, and he says he didn’t plan to use them in the infringement case. He continued to belittle Quickturn’s attempt to get the case thrown out because of the tampering. “It had the appearance of a typical sideshow,” the Latham partner says. “A good sideshow, but a sideshow nonetheless.”

Whether a sideshow or an insult to the integrity of the legal system, the dispute over the notebooks’ alteration was headed to a hearing before Judge Alsup. InFebruary 2000, the morning before the hearing, Brooks was asleep in the Park Hyatt San Francisco. The Lyon & Lyon team had set up its trial center at the hotel for the upcoming hearing on whether Alsup should grant the tenninating sanctions and dismiss the case. Brooks was awakened at 6 a.m. by a phone call from Taylor at Howrey. Taylor said he could no longer represent Aptix because of a conflict between the company and Mohsen.

Why did Taylor wait nearly two years, until the literal eve of a crucial evidentiary hearing, to decide Mohsen wasn’t telling the truth? Taylor insists that he didn’t reach this conclusion until he reviewed experts’ reports that he had received the preceding weekend. “I was not prepared to let [Mohsen] testify to what he wanted to say,” says Taylor, who declines to reveal the nature of those reports. “When I put all the evidence together and tried to figure out how to present it most persuasively to the court, I came to the conclusion the notebooks could not be admitted.”

Taylor continued to represent Aptix, but not its CEO; Mohsen hired white-collar specialist Daniel Bookin of O’Melveny & Myers’s San Francisco office. Taylor says he had an obligation to continue to represent his client, the company.

The hearing was postponed until May 2000 to allow Mohsen’s new counsel to prepare. Both parties brought forensic ink experts who had tested entries in a Daytimer calendar that Mohsen had produced to back up his claims that his brother, Aly, had witnessed the 1988 notebook entries. Quickturn’s expert testified that some ink in the Daytimer wasn’t on the market until 1994. The expert for Mentor and Aptix disputed that finding. Quickturn called Mohsen to testify, but the CEO stayed silent, asserting his Fifth Amendment privilege.

Taylor conceded to Judge Alsup there were “tremendous irregularities” between the notebooks, but he argued they didn’t show Mohsen acted with a “culpable state of mind.” Latham’s York maintained that even if Mohsen had lied, dismissal wasn’t justified because the notebooks had become irrelevant. The plaintiffs were staking the validity of Mohsen’s patent on the date that Mohsen applied for it, not the date of its conception. If the plaintiffs were dropping their reliance on the notebooks as evidence, York contended, the case couldn’t be dismissed.

This line of reasoning didn’t sit well with Judge Alsup. “Let’s just say, this is purely hypothetical, let’s say that an inventor just phonies up records to beat the band,” said Alsup to York. “He tries, but he doesn’t get away with it. . . . Could ajudge impose a tenninating sanction?”

“If [the phony records are] not material to the outcome of the case and could not have affected the outcome of the case, then you do not impose terminating sanctions,” York answered.

“Even though . . .” Alsup started.

“Even though he lied,” York finished.

“Even though he lied, and he thought he was lying about something that would help him win the case?” the judge asked.

“That’s right. Because it’s not-it didn’t cause the court . . .”

“I can’t believe that’s the law,” an incredulous Alsup shot back. “I can’t believe that you can try to cheat the court, and then when you get caught you say, ‘Well, it didn’t matter. I got caught. So, therefore, it’s not material.’ ”

The next month Judge Alsup released his opinion. He wrote that Mohsen had been “caught red-handed” fabricating the entire 1988 notebook, which he called “a complete fraud from bark to core.” He concluded that Mohsen had also falsified at least 16 pages of the 1989 notebook and several Daytimer entries, and that he likely had staged the notebook theft.

“Egregious” and “reprehensible” was how Alsup described the CEO’s conduct. Citing Mohsen’s “premeditated and sustained campaign of lies and forgery,” the judge declared the Aptix patent unenforceable. On the question of whether Mentor and its subsidiary, Meta, had acted in bad faith, the judge said he was making no findings. But he would not allow Mentor to profit from its alliance with Mohsen by enforcing the patent. He awarded Quickturn $4.6 million in fees and $850,000 in costs, to be paid by Aptix.

Having no more use for Aptix and Mohsen, Mentor turned against its former ally. In November 2001 it sued Aptix to get $2 million of its loan repaid. Mentor won a judgment, and the parties settled.

The U.S. Court of Appeals for the Federal Circuit later held that Alsup was correct to bar Mentor and Aptix from enforcing the patent. But it concluded that Alsup went too far when he declared the patent invalid. This minor victory, however, was oflittle use to Mohsen, and of no use to Mentor’s battle against Quickturn.

In September 2003-after eight years of litigation-a truce was announced by Mentor and Cadence Design Systems, Inc. [which had bought Quickturn in 1999, thwarting Mentor’s takeover attempt]. They agreed to settle all suits relating to emulation systems, and promised not to bring any such claims against each other for seven years. Itwas the end of an expensive fight for Mentor. According to securities filings, Mentor spent more than $55 million in legal fees on Quickturn litigation from 1998 to 2003; it invested an additional $26 million on the failed hostile takeover attempt.

What did the company get in return? Nothing, it appears. All the infringement suits failed. One filed in Portland, Oregon, ended in a $3 million judgment for Quickturn after trial. Another in San Francisco that also went to trial ended in a total defense verdict for Quickturn. Mentor’s general counsel, Dean Freed, did not respond to a request for comment.

As the Lyon & Lyon lawyers were winning the Quickturn battle, their firm, like many small intellectual property boutiques, was going under. When it dissolved in early 2002, Brooks and Miller joined Orrick, Herrington & Sutcliffe.

Meanwhile Moh-sen’s problems were escalating. InNovember  2001 Judge Alsup wrote to federal prosecutors in San Francisco suggesting they investigate the Mohsen brothers for perjury and falsification of evidence. InMarch of 2003 a federal grand jury indicted Amr Mohsen for obstruction of justice,  citing the falsification of the notebooks, the staged theft, and the mysteriously reappearing fragments. Both Amr and his brother Aly were charged with perjury based on statements made in their depositions. Trial was set for March 2004, with Judge Alsup presiding. The Mohsen brothers asked Alsup to recuse himself, arguing that he was biased. Alsup refused.

On March 27, 2004, three days before the criminal trial was scheduled to start, the FBI arrested Amr Mohsen as a flight risk. Apprehended outside his mother’s apartment complex in Campbell, California, he was carrying a newly issued Egyptian passport, in violation of his bail agreement, and $20,000 in cash. According to a superseding  indictment, Mohsen had been overheard making flight reservations to the Canary Islands. He stepped down as CEO and chairman of Aptix and was detained without bail in the Santa Rita jail. It’s there that Mohsen allegedly began hatching his scheme to have Judge Alsup killed. He also plotted with the informant about ways to intimidate some of the government’s witnesses. He suggested setting fire to the car of one.

Once Alsup was gone, Mohsen predicted to the informant, “Everything will go my way.”

At press time Mohsen was being kept in solitary confinement in jail. He is allowed out of his cell three hours a week to make phone calls to his lawyers. At a preliminary hearing in August, Mohsen wore a red jumpsuit and repeatedly looked over to his wife. She sat near Mohsen’s brother and codefendant, Aly, who is free on bail. On April 28 Aptix filed for bankruptcy.

The entire San Francisco bench has recused itself from Mohsen’s case. At press time it was being handled by federal district judge William Shubb from Sacramento. Mohsen’s current lawyer, John Williams of San Jose’s Manchester, Williams & Seibert, declined comment.

Sitting in a spare room in Howrey’s San Francisco office, Robert Taylor says it’s painful to recount his strange saga with Amr Mohsen. “This is a genuine tragedy of an extremely smart guy being too smart for his own good,” says Taylor. “It’s like a Shakespearean tragedy in every sense.”

Taylor is still baffled why Mohsen would risk so much. “This was not Aptix’s fight,” he says. “It was Mentor’s  fight. . . . You would think somebody putting his reputation and fortune and liberty on the line would have a lot more at stake than what Amr Mohsen had at stake. It makes no sense to me at all. It never has.”

Asked if he wished he had done anything differently, Taylor pauses. “Anytime you get a dreadful result, you think there are a lot of things you might have done differently,” he responds. “I’ve paid a lot of attention to what my obligations to the judicial  system are, and I try hard to honor them. I think I did. I suppose ifl had known how badly this would have turned out, I would have abandoned reliance on the notebooks earlier. But you never want to give up the opportunity to push the invention date back as early as you can. . . . That was a dilemma for me and [York].”

Yorlc, however, appears less troubled by the predicament he faced. The Latham partner continues to dismiss the controversy over the notebooks as irrelevant to the heart of the case. “Amr Mohsen could have been sanctioned to the eyeballs for all I care,” he says. “It didn’t detract from the fact that this was a good patent case. . . . The whole notebook thing was nothing.”

York doesn’t see anything he would have done differently. “[Mentor] did not control the evidence,” he explains. “Amr Mohsen did what Amr Mohsen did. There’s not much you can do about that except quit early, and the case did not merit quitting.”

Today, Brooks doesn’t fault his opposing counsel. Perhaps it’s the perspective that comes from being four years removed from the battle. “They were advocates,” says Brooks, speaking by phone from Houston, where he was in trial for another client. “I don’t know what they believed and didn’t believe at the time. All I can say is, they were fighting their client’s battle, and we were fighting ours. . . . I don’t have any ax to grind against David or Bob or Latham or Howrey. They did what they had to do. . . . The battle is over now.”

But not for Amr Mohsen.

Chronology of the Case

1989 Amr Mohsen applies for patent for a field programmable circuit board. 1996 Patent and Trademark Office awards patent to Mohsen’s company, Aptix.

1997 Quickturn wins an International Trade Commission ruling barring Mentor’s subsidiary, Meta, from importing a hardware emulation device.

February 1998 Aptix and Meta sue Quickturn for infringement after Aptix licenses patent to Meta and Mentor Graphics.

August 1998 In a deposition, Quickturn’s lawyers confront Mohsen with inconsistent copies of his 1989 inventor’s notebook.

December 1998 Shortly before hearing on motion to compel production of Mohsen’s notebooks for forensic testing, Mohsen reports notebooks stolen.

May 1999 Cadence buys Quickturn, thwarting Mentor’s attempted hostile takeover.  August 1999 San Francisco federal district court judge William Alsup takes over the case.

September 1999 Judge Alsup orders briefing on whether the case should be dismissed due to “spoliation of evidence.” Hearing is set for February 2000.

January 2000 Mohsen reports receiving fragments of stolen notebooks mailed anonymously to him.

February 2000 On the eve of the evidentiary hearing, Howrey Simon partner Robert Taylor withdraws from representing Mohsen, but continues to represent Aptix.

May 2000 Judge Alsup holds the evidentiary hearing to determine if he should dismiss the case for spoliation of evidence.

June 2000 Citing Mohsen’s misconduct, Judge Alsup dismisses the case and declares the patent invalid. November 2001 Judge Alsup refers a possible perjury and obstruction of justice case against Mohsen to the U.S.attorney’s office.

March 2003 Mohsen and his brother, Aly, are indicted for perjury and obstruction of justice.

March 2004 Three days before scheduled trial, Mohsen is arrested on suspicion he intended to flee the country. He is held in jail.

June 2004 Mohsen allegedly plots with fellow inmate to have Judge Alsup killed.

July 2004 A federal grand jury issues a superseding indictment including charges that Mohsen conspired to have Judge Alsup murdered.

-Susan Beck

Aptix Case