EMERGENCY MOTION FOR CLARIFICATION OF TEMPORARY RESTRAINING ORDER
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
CALYPSO WIRELESS, INC., and
DRAGO DAIC
Plaintiffs,
v.
T-Mobile USA, Inc.
Defendant.
§§§§§§§§§§
Case No. 2:08-CV-00441
Expedited Hearing Requested
EMERGENCY MOTION FOR CLARIFICATION OF TEMPORARY RESTRAINING ORDER
On January 13, 2010, Plaintiff Calypso Wireless, Inc. (“Calypso”) moved for, and the Court granted, a temporary restraining order (“TRO”) to prevent Co-Plaintiff Drago Daic, Jimmy Williamson P.C., and Kelly D. Stephens (the “Daic Parties”) from destroying Calypso by auctioning off substantially all of Calypso’s assets.1 Specifically, the Court ordered “that Drago Daic, Jimmy Williamson, P C, and Kelly D. Stephens (in his capacity as purported trustee) … are temporarily restrained and enjoined from proceeding with any sale or auction of the Patentin-Suit … during the pendency of this order.”2 The Court stated, as the reason for granting the TRO, “that the sale of the Patent-in-Suit under these circumstances would leave Calypso with substantially no assets and that the harm suffered is likely to be irreparable.”3
Notwithstanding the issuance of this Court’s TRO, the Daic Parties took the position that they were free to sell all of Calypso’s patents except the specific one that has been asserted in this case.4
The Daic Parties made clear that they intended to proceed to auction all of Calypso’s patents except the ‘923 Patent. Calypso disagreed, but in view of the criticality and timing, Calypso filed for and received at temporary restraining order from a Texas state court in Houston regarding the remainder of the portfolio. The issues governing the rights and responsibilities of
the parties with respect to the ‘923 Patent are identical to the issues regarding those rights with respect to the remainder of the portfolio because they are both governed by the same questions of contract interpretation and questions of fact. Calypso desires to dismiss without prejudice the state court action, but the Daic Parties have made clear that they will sell the entirety of Calypso’s portfolio (except for the ‘923 Patent) if the state court TRO is dissolved, notwithstanding the existence of this Court’s TRO. Calypso seeks clarification, or, if necessary, modification of the Court’s TRO to encompass Calypso’s entire portfolio; not solely the ‘923 Patent.
In contrast to the Daic Parties, Calypso read the Court’s TRO as applying to all of the patents and intellectual property rights (the “Calypso IP”) seized by the Daic Parties, because the
Court’s stated rationale relates directly to the fact that Calypso requested the TRO on the grounds that the Daic Parties had “improperly seized the patent[-in-suit], along with all of
Calypso’s other intellectual property,”5 which “constitutes substantially all of Calypso’s assets,” the sale of which would result in Calypso being “left with nothing, and [having], as a practical matter (owing to the fact that, with no assets, it has no way of securing necessary additional funding), no way to remedy this wrong.” Calypso reasoned that if the Court, after reading Calypso’s motion, concluded “that the sale of the Patent-in-Suit under these circumstances would leave Calypso with substantially no assets and that the harm suffered is likely to be
irreparable,”6 then the logical conclusion is that the TRO applies not just to one of the patents, but to the entire portfolio that “constitutes substantially all of Calypso’s assets.” If this were not the case, the TRO would fail to protect Calypso from the very harm that the Court found to be “irreparable” and “threat[ened] immediately.”7
On the morning of January 14, 2010, however, Calypso contacted the Daic Parties regarding the Daic Parties’ plans, and the Daic Parties indicated that, notwithstanding the Court’s TRO, they intended to proceed with the auction, albeit without the ‘923 Patent. Having been informed that Judge Ward was not in chambers the rest of the week, and concerned that it had one shot at preventing the destruction of the company, Calypso went to state Court that same day (January 14) and, on the morning of the auction (January 15), secured a second TRO preventing the sale of all of the Calypso IP. Acting out of an abundance of caution – which only seemed prudent given the stakes here – Calypso paid an additional $25,000 bond to secure the protection it already thought it had.
As explained above, Calypso believes that the reasonable and logical reading of this Court’s TRO – the only reading under which the TRO would actually provide the relief it purports to grant and prevent the destruction of Calypso – is a reading in which the Daic Parties are barred from proceeding with the auction of all of the Calypso IP, rather than just the ‘923
Patent. Should the Court disagree, however, Calypso respectfully requests that the Court expand the scope of the TRO to cover the entire proposed auction of Calypso’s IP. Doing so would prevent the irreparable and immediate harm (i.e., the “circumstances [that] would leave Calypso with substantially no assets”8) that the Court already found, and make the TRO effective to do what it purports to do (i.e., prevent the destruction of Calypso). It would also prevent a potential conflict in rulings between this Court and the Houston state court, which will be dismissed
without prejudice if this Court grants the relief requested herein.
At the upcoming preliminary injunction hearing, this Court is already set to consider the question of whether the Daic Parties have any right to seize (and try to auction) at least the ‘923
Patent. As explained in Calypso’s original request for the TRO9, the Daic Parties based their claim of right to seize the ‘923 Patent (along with all the rest of the Calypso IP) on a purported
contract – the “2009 Duress Agreement” – the validity and enforceability of which Calypso disputes.10 The 2009 Duress Agreement purports to set out the parties’ rights as to all of
Calypso’s intellectual property. Thus, if the Court makes a determination as to the Daic Parties’ rights to the ‘923 Patent under the 2009 Duress Agreement, the Court will also be making a
determination as to the Daic Parties’ rights as to all of the Calypso IP.
The state court, in considering whether to grant a temporary injunction to enjoin to the Daic Parties from selling the Calypso IP (including the ‘923 Patent), will have to consider the
2009 Duress Agreement, and will make a determination as to the parties’ rights in that patent (which of course, is something of an important issue for purposes of the patent infringement claims against T-Mobile USA, Inc.). The fundamental problem here is that a preliminary injunction would not be “a final judgment on the merits,” and thus any determination the Court makes would therefore not have 8 Court’s TRO at res judicata effect on the state court’s consideration of the same question (or vice versa).
Because this Court’s hearing is now delayed, the parties face a situation11 where we must proceed in two different forums to obtain potentially conflicting and non-preclusive rulings as to
the Daic Parties’ rights under the 2009 Duress Agreement. This could be prevented (in the event that the Court disagrees with Calypso’s reading of its TRO) by expanding the TRO to prevent the
auction of all of Calypso’s intellectual property, which would afford Calypso the protection it needs (a) to survive, while (b) dismissing its state court claims against the Daic Parties. The
alternative is for Calypso and the Daic Parties to proceed with the state court hearing, which may result in a temporary injunction against the Daic Parties, along with a non-preclusive ruling as to the Daic Parties’ rights to all of Calypso’s intellectual property (including the ‘923 Patent) under
the 2009 Duress Agreement, or dismiss the state court proceeding and face the possible sale of most of its patent portfolio.
This situation is a mess. Calypso regrets that it had to seek additional relief in state court. If the Daic Parties had not taken an unreasonable position in the face of a federal TRO enjoining them from proceeding with their auction, going to state court would not have been necessary. As it was, however, Calypso had no choice; the alternative was to lose most its assets. Calypso respectfully requests the Court’s assistance in either (a) clarifying that the January 13, 2010 TRO prevents the sale of Calypso’s entire patent portfolio, or (b) expanding the TRO, if necessary, so that it actually provides the relief it purports to provide.
11 Calypso acknowledges that, but for the fact that Calypso sought a state court TRO, this would not be the case. Calypso respectfully submits, however, that the Daic Parties, with their unreasonable and imprudent reading of the Court’s TRO, are equally at fault. Calypso did not want or think it appropriate to seek relief in state court. If Calypso had thought it appropriate to let a state court deal with questions underlying the current action against Defendant T-Mobile USA, Inc., Calypso would have filed in state court in the first place.
Dated: January 20, 2010 Respectfully submitted,
/s/ Anthony Miller
Paul V. Storm (lead counsel)
paulstorm@stormllp.com
State Bar No. 19325350
Anthony P. Miller
amiller@stormllp.com
State Bar No. 24041484
Michael Leach
mleach@stormllp.com
State Bar No. 24065598
Storm LLP
901 Main Street, Suite 7100
Phone: 214-347-4700
Fax: 214-347-4799
CERTIFICATE OF CONFERENCE
Counsel for Calypso Wireless, Inc. contacted counsel for Drago Daic, Jimmy
Williamson, P.C., and Kelly D. Stephens. Vernon Lawson indicated that they are opposed to this
motion. Counsel for Calypso Wireless, Inc. also contacted counsel for T-Mobile USA, Inc., who
indicated that T-Mobile USA, Inc. is not opposed.
CERTIFICATE OF SERVICE
I hereby certify that on January 20, 2010, I caused a true and correct copy of the
foregoing to be served on all counsel of record via the Court’s CM/ECF system, pursuant to
Local Rule CV-5(a)(3). Vernon Lawson, who is counsel for Co-Plaintiff Drago Daic and will
therefore be served via the Court’s CM/ECF system, has indicated that his firm represents both
Jimmy Williamson, P.C. and Kelly D. Stephens. Both will therefore be served as a result of
Calypso’s electronic filing of the foregoing motion.
/s/ Anthony Miller
Anthony Miller
Case 2:08-cv-00441-TJW-CE Document 98 Filed 01/20/2010 Page 6 of 6
