San Diego Jury Rules That Email Exchange Over Possible Patent Purchase Did Not Constitute Valid Purchase Agreement

Mar 23, 2011, 15:44 ET from Klinedinst

SAN DIEGO, March 23, 2011 /PRNewswire/ -- With the help of Klinedinst attorneys Greg Hensrude and Dan Agle, Defendant Tom Coverstone prevailed at trial in a breach of contract suit involving the sale of a patent portfolio. In Fleming v. Coverstone, a Boise, Idaho patent attorney named Hoyt A. Fleming, III claimed that Coverstone had created a binding contract to purchase Fleming's radar detector patent portfolio for $1 million, based on an informal email exchange with Coverstone. After a four day trial, the jury of eight men and women found unanimously that the email exchange was not a binding contract and, therefore, there was no breach when Coverstone declined to purchase the patents after coming to the conclusion that they had little to no value.

The dispute dates back to 2007 when Michael S. Dowler, then a lawyer for Coverstone and a personal friend of Fleming's, introduced the opportunity to purchase Fleming's patent portfolio to Coverstone. As the head of GMT Management Co., Coverstone looked into the opportunity, and entered into an informal purchase option agreement via email to look at the patents in more detail. As part of their email exchange, Fleming alluded to the refund policy of any deposit, and that Coverstone's attorneys would draft the necessary agreements.

With an option agreement in place, Coverstone began his due diligence in earnest. As part of this process, he uncovered several questions as to the validity and true ownership of the patents, as well as Fleming's conduct while prosecuting the patent applications before the U.S. Patent and Trademark Office (USPTO). Questions also arose as to the involvement of Fleming's church, Vineyard Christian Fellowship of Boise, and how Fleming would be using it to transfer a portion of the patent portfolio to Coverstone. After conducting his due diligence, Coverstone determined that the patents had little to no value, and elected not to proceed with the purchase. In 2008, Fleming filed federal lawsuits against Coverstone individually in multiple jurisdictions, including Idaho and the U.S. District Court for the Southern District of California.

After abandoning the Idaho lawsuit, the jury trial in California started on March 15, 2011. Fleming's attorneys argued that the brief emails he exchanged with Coverstone constituted a binding contract to purchase Fleming's patent portfolio, whose value he pegged during deposition "in excess of a million dollars." Klinedinst attorneys Hensrude and Agle countered that Fleming still owned the patents and, therefore, had not been damaged. With the help of Mr. Dowler, Coverstone's former attorney who is now a partner in Fleming's law firm, Fleming is proceeding with a patent enforcement action against Escort and Beltronics at the same time. Messrs. Hensrude and Agle also countered that the email exchange constituted an option to purchase, which allowed Coverstone's company to conduct the due diligence necessary to determine whether GMT wanted to ultimately purchase the patents. Coverstone, they argued, should never have been named as a party individually, and that in all of the discussions and emails Coverstone was acting on behalf of his company.

After two days of deliberation, the jurors unanimously found that no valid purchase contract could be inferred from the emails, bringing to close a complex breach of contract case that had lasted over three years. "At trial, cases involving complex sets of facts and legal issues need to be presented in a clear and common-sense fashion," said John Klinedinst, CEO of Klinedinst PC. "Greg Hensrude, Dan Agle, and our entire legal team used their trial experience and cutting-edge technology to take legal complexities and simplify them in a manner that was clear and well-communicated. The jurors unanimously agreed that Mr. Coverstone had the right not to proceed with the purchase, and we are thankful for their service."

Klinedinst congratulates Messrs. Hensrude and Agle for their complete defense verdict in Fleming v. Coverstone, Case No. 3:08-CV-00355. For more information on their biographies, please visit:

http://www.klinedinstlaw.com/profiles/

ABOUT KLINEDINST

The award-winning business law firm of Klinedinst PC has achieved the highest AV®-Preeminent™ rating for legal ability and ethical standards by Martindale-Hubbell. The firm and its attorneys are engaged in litigation and transactional law practice throughout California, serving clients from offices in San Diego, Orange County, Los Angeles, and Sacramento. For more information about the firm, please visit Klinedinst's comprehensive website at www.klinedinstlaw.com.

Contact:  Scott Carr
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scarr@klinedinstlaw.com

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