Claiming excessive fees, patent holder sues law firms for $10 million

A retired university professor who has pursued dozens of electronics companies for patent infringement on Monday filed a notice to sue her former attorneys for $10 million, accusing them of misusing escrow funds and charging her excessive fees.

Gertrude Neumark Rothschild filed a summons in Manhattan Supreme Court against Troutman Sanders; an intellectual property boutique chaired by Albert L. Jacobs Jr. before he became a partner at Troutman; and Jacobs.

Her motion comes only days after Troutman, Jacobs and the now-defunct boutique filed separate lawsuits against her in Westchester County Supreme Court for a combined $4.4 million in unpaid legal bills. Rothschild said in her court papers that she fired Troutman Sanders for cause in June.

Jessie F. Beeber, a lawyer for Rothschild at Frankfurt Kurnit Klein & Selz, declined to comment. A spokesman for Troutman Sanders, represented by partner Lee W. Stremba, declined to comment. Jacobs, who is represented by Howard J. Rubin at Davis & Gilbert, said his boutique's complaint spoke for itself and declined further comment.

Jacobs and four other patent lawyers joined Troutman Sanders in 2009 from Albert Jacobs LLP, an intellectual property boutique formed by Jacobs after the collapse in December 2008 of Dreier, where he had been a partner. The 250-lawyer Dreier filed for bankruptcy following the arrest of namesake Marc S. Dreier.

Jacobs began representing Rothschild, a former Columbia physics professor, in October 2007 after arriving a few months earlier at Dreier from Greenberg Traurig, according to his boutique's complaint. Rothschild retained him to represent her before the International Trade Commission in cases against companies importing devices using light-emitting diodes that she claimed infringed on patents she held.

Rothschild turned to Jacobs for later disputes both in the United States and abroad, his complaint said. Among those Jacobs targeted for Rothschild were Sony Corporation, Motorola Inc. and Hitachi Ltd. and 31 other companies, according to records filed in February 2008 before the U.S. International Trade Commission.

By November 2009, when Jacobs formally became a partner at Troutman Sanders, he had obtained $14 million in settlements and licensing fees for Rothschild, according to the boutique's complaint, which said settlements and agreements came from 10 large consumer electronic companies.

Rothschild paid Albert Jacobs LLP on some of its invoices, "but has failed and refused" to pay other ones, the boutique said in its complaint. She "never expressed any dissatisfaction with the legal services" the boutique rendered, the suit claimed, but instead "commended" its efforts.

Troutman in its complaint said the work for Rothschild continued when Jacobs joined the firm and resulted in "a significant settlement" from "one of the largest LED manufacturing companies in the world" in June 2010.

Court records show that in June Rothschild, represented by Troutman, settled a suit in the U.S. District Court for the District of Massachusetts against Cree Inc., which was represented by Weil, Gotshal & Manges.

In her summons, Rothschild said she fired Troutman for cause and she alleges breach of fiduciary duty, specifically "misuse of escrowed funds, misappropriation, overcharges, illegal mark-ups, excessive fees and other billing irregularities." She also alleged tortious interference with a contract, fraud and conversion.

Rothschild is seeking compensatory, punitive and treble damages, and a declaration that all legal fees paid or billed by Albert Jacobs LLP and Troutman Sanders from December 2008 to June 2010 are subject to forfeiture or do not need to be paid.

The cases are Rothschild v. Troutman Sanders LLP, 111240-2010, in Manhattan Supreme Court; Albert Jacobs LLP v. Rothschild, 20455-2010, and Troutman Sanders LLP v. Rothschild, 20456-2010, both in Westchester, N.Y.

(Published by Law - August 26, 2010)