Photo provided by McKool Smith
A little over a decade ago, Mike McKool and the Dallas-based firm he founded,McKool Smith, made a calculated bet in starting a patent litigation practice. At the time, the firm didn’t have any patent lawyers among its ranks and had merely been assisting intellectual property boutique attorneys in litigating cases.
But under McKool’s leadership, the firm aggressively recruited patent lawyers to create a powerful patent litigation practice. McKool Smith boasts some of the largest patent verdicts in recent years, including two nine-figure verdicts against Microsoft Corp., the first for $200 million and the second for $106 million. Its latest string of patent litigation victories earned the firm the distinction of winning more Top 100 verdicts than any other firm, according to VerdictSearch.
Now, McKool sees a new opportunity in financial litigation with the banking industry in his cross-hairs. He is personally overseeing the growth of the firm’s New York office, which has rapidly grown in the last two and a half years.
Lawdragon: Your firm recently made an aggressive push in New York City. Tell us why and what you hope to accomplish.
Mike McKool: The robustness of the legal market in New York City is leagues ahead of anywhere else in the country, particularly in financial litigation. We started two and a half years ago with one lawyer and we now have 28 in New York, and we could very easily double within the next year. Our name is known, people know who we are, and there’s a segment in the market, particularly those who have cases against financial institutions, that find our firm very attractive.
We’ve hired superb New York lawyers and staff from such firms as Davis Polk, Quinn Emanuel, Weil Gotshal and Simpson Thacher. The recession has produced opportunities for us, particularly in financial litigation. We’ve melded our financial litigation practice with our bankruptcy practice, which was added about a year ago.
LD: Tell me a little bit about the financial litigation practice.
MM: This is litigation generally stemming from failed business deals, and a lot of times there is some kind of lending involved. Recently, we’ve been hired by Freddie Mac in connection with a bankruptcy. It’s a very, very significant matter for us, and we’re protecting the interests of Freddie Mac. Our practice is generally opposed to financial institutions. We have lawyers who have many, many years of experience doing that kind of work. For example, there's Jack Cooney, who was at Davis Polk for almost 35 years. Jack is very well known in financial services and white collar cases. He understands the business, and lawyers know who he is. Jack has two cases involving the Madoff situation. We represent a feeder fund that invested its clients’ money with Madoff.
LD: What’s the effect of the recession on your practice?
MM: This has been an unusual recession because, in past recessions in the early 2000s and 1990s, they have resulted in an overall increase in business litigation. But that hasn’t been the case this time. If you look at all the indicators you’ll find that litigation has declined during this recession, but the kind of litigation in which we specialize has not. Patent litigation is steady, and our firm has actually increased our share, so we are doing very well in that area.
In the financial area, obviously there have been a number of business ventures that have gone bad, and those typically result in litigation. There has also been a rise in bankruptcies, and we have a very active bankruptcy section that is headed by Hugh Ray that is feeding litigation to us. So it just happened that we are in areas where we have been able to take advantage of the recession. What we saw in 2008 and 2009 is that our bankruptcy practice picked up considerably, and we saw that litigation stemming from bankruptcy is also going to increase. So we made a move at that time to include a significant bankruptcy practice within our firm, which we’ve never had before. We engaged Hugh who has offices in both Houston and New York, and the arrangement has been very successful. We just try to look and see what the market has to offer and try to move in that direction.
LD: What’s the biggest misconception about your firm and the work you do?
MM: I think because of the way the world works, the big verdicts that are always publicized are the ones where the plaintiffs win. Nobody is interested in cases where money doesn’t change hands. So our litigation work typically makes news but not our substantial defense practice. We represent businesses and companies in defense matters. For example, American Airlines is a client of mine, and we represent them in patent litigation from the defense side. And I got a case from Lockheed Martin defending them in a very significant antitrust case. So we do quite a bit of defense work as well.
LD: You’ve vanquished many corporate giants in the courtroom. Is there a particular case or company you opposed that is more memorable than others?
MM: We tried and won a case two years ago called i4i v. Microsoft and that case is now before the U.S. Supreme Court. We got a $290 million verdict and judgment in that case. Actually, it is hard to pick one out because our firm in the last two years has won more top 100 verdicts, according to the National Law Journal, than any other firm in the country. Most of those cases are patent cases against major companies.
LD: What is the biggest challenge of opposing corporate giants like Microsoft?
MM: Obviously, they have lots and lots of resources, and we take many of our cases on a contingency-fee basis. It is our resources against theirs, and that’s not really a very fair fight. Our firm right now has about $20 million of our shareholders’ money in the bank because we need those kinds of resources to deal with these major cases. We’ve had cases where, in attorney time and out of pocket expenses, we’ve had to invest more than $30 million. For these big companies that’s a very, very small amount of money to them, but it’s a lot of money to our law firm.
Right now we are handling a case for Eolas. They got a $500-million verdict against Microsoft before, and we’re now handling their case against much of the rest of the industry. There are a lot of big companies on the other side of that case. It’s not a problem matching them against our lawyers. The problem is matching them toe-to-toe financially – money that you would otherwise distribute to your partners, you have to put in a kitty for investment in these large cases. We have about 15 contingency-fee patent cases right now.
LD: Your firm has been hailed as a great model and proponent of contingency-fee work because of your success in picking real winners. Is there a secret to that?
MM: Yes, there is – it is the willingness to spend resources at the front end in deciding what case you should take. We end up agreeing to take less than 10 or 20 percent of the cases we are offered. We got a reputation now for being successful so we see lots and lots of those cases. I get two or three calls a week from inventors and technology companies. Our firm spends easily $100,000 to $200,000 per case on ones that pass the first hurdle. We spend sometimes $200,000 before we say no, but that’s money well spent because you can spend $10 million to $20 million very easily only to find out that you’ve got a problem. And you still can spend that much money because there is no way you can know all the possibilities. You have to spend a million dollars or more to do that kind of analysis. We have a rigorous system in place to determine which cases would be appropriate for us to undertake.
LD: What advice would you give a young lawyer about to embark on a career as a trial lawyer?
MM: To try cases or put yourself in a position to try cases and be able to get up in front of a courtroom. The problem with practicing law at the highest level is there’s not much opportunity for young lawyers to do significant courtroom work, and clients are not expecting a second-year lawyer to represent them in court. One way lawyers could do it is to work for the U.S. attorney’s office and get some courtroom experience. At our firm we make it a standard to allow our young lawyers to have some role in the courtroom in virtually every case. In the VirnetX case, where we got a $106 million jury verdict against Microsoft this year, there were four lawyers that participated in front of the jury, and three of them were associates. We have to be careful where we put them, but we know that judges and juries like young lawyers. We insist that they work hard and prepare to offset their inexperience. But we give them appropriate tasks and get them in the courtroom.
LD: We heard you own eight guitars and hundreds of CDs and pieces of sheet music. You bring a guitar every time you travel for a case.
MM: I’ve been playing guitar since I was young. I took guitar lessons when I was 11 or 12. I like handmade guitars. I like the fact that I can specify certain dimensions. I have them made here and even ones from South America and Finland. I enjoy handcrafted things. I think they are works of art as well as beautiful musical instruments. And I love how each of them sounds different from one another.
LD: Aside from your music, what else do you do for fun?
MM: I have over 30 motorcycles. Music and motorcycles might sound like incongruous hobbies, but I love them both. I just got a brand new one, and I have a lot of fun doing both things.