Sonos Shoots Back; D&M Filings ‘Not Entirely Accurate’

Sonos logoThe legal battle in the patent infringement case filed by Sonos, Inc. (Sonos) against D&M Holdings, Inc. dba The D+M Group, D&M Hodlings U.S. Inc., and Denon Electronics (USA), LLC (D&M) continues to heat up as lawyers launch new salvos against each other alleging – among other things – improper actions. In February, we reported that D&M’s legal team had filed a Motion to Disqualify the Sonos legal team, with the astonishing allegation that at one time these lawyers worked for both Sonos and D&M at the same time.

Now, Sonos’ legal team shoots back, saying D&M’s filings are “not entirely accurate”…

Back in October 2014, Sonos filed a patent infringement lawsuit against the various D&M companies alleging violation of four of its patents related to their wireless multiroom audio systems. The original suit has since been amended and expanded, but it remains largely a patent infringement case.

In February 2015, D&M fired back – asking the judge to dismiss the case. D&M’s arguments were largely legally technical, saying Sonos had failed to meet the required minimum threshold established by law to sustain this kind of patent infringement case.

Working both sides of the street?

Then in late February, we were surprised to see D&M file a Motion to Disqualify Sonos’ legal team. The various motions, briefs, and declarations associated with the D&M filing painted a pretty damning picture of betrayal and conflict of interest.

D&M alleged that Sonos’ lawyers Lee, Sullivan, Shea & Smith (LS3) were all just weeks before part of McDonnell Boehnen Hulbert & Berghoff LLP, (MBHB) a well-known intellectual property law firm that not only represented Sonos, but at one time had also represented D&M in patent matters. In fact, we discovered that MBHB was representing both firms at the same time.

Sounds kind of fishy…

D&M LogoThe motion D&M filed had carefully laid out timing that seemed to infer some type of planned effort by MBHB to resign the D&M account (or, as they put it, fired D&M as a client) and then sue them on behalf of Sonos. We’d have to admit, when we first reviewed D&M’s materials, it definitely sounded fishy.

Not so fast,  Sonos says, in papers it filed opposing D&M’s Motion to Disqualify. Not surprisingly, Sonos’ filings go on to paint a very different picture of just what happened…how it happened…and when it happened. And, as Sonos principal attorney George Lee claims in his declaration several times, D&M’s “statement is not entirely accurate.”

D&M’s portrayal ‘is not entirely accurate’…

Sonos’ legal team then went about picking apart D&M’s portrayal of the situation. For example, D&M rather dramatically alleges as we put it in our report that three of the four principals of LS3 were “up to just a few short months before Sonos filed suit against D&M, actually representing D&M in patent and trademark matters.”

Shocking, you say! Not true, LS3 says. According to this latest Sonos opposition filing, Sonos says “no LS3 partner has provided any legal services to D&M since March 2009 – three years before D&M even acquired in 2012 the technology leading to D&M’s ‘HEOS’ products that are accused of infringement here.”

The companies were not competitors at that time…

There is no denial that MBHB (who initially filed the suit but then inexplicably recused themselves from it) was working with Sonos years ago on their wireless music systems…while also working with D&M – with, apparently, a different set of attorneys – on their portfolio of other technologies. D&M, as the opposition papers note repeatedly, did not even enter the wireless music systems business until June 2014.

To further drive the point, Sonos’ filing adds:

“Specifically, Mr. Lee last worked for D&M in March 2009, Mr. Sullivan in July 2007, and Mr. Shea in October 2006 (Mr. Smith has never worked on any [D&M] matter)…These D&M matters from over 6 years ago involved different patents and/or legacy products that were already developed and on the market as of March 2009 and have since been discontinued.”

Sonos’ suspicions…

Sonos’ became suspicious of D&M’s Motion to Disqualify filing when it noted that their allegations were mostly general in nature and didn’t directly specify specific acts by these attorneys that show a direct conflict. And even when the D&M filing did offer specifics, well, they just didn’t make and sense.

“For example, while D&M mentions the fact that Messrs. Lee and Sullivan worked on three D&M patent applications, these applications were for a D&M affiliate called ‘Replay TV Products’ – a former competitor of TiVo in the Digital Video Recorder (DVR) industry that was sold by D&M to DirecTV in 2007… Messrs. Lee and Sullivan’s work on these applications could not have led to disclosure of confidential information related to the present litigation.”Photos of Sonos & HEOS products

We didn’t fire you…you quit!

But what of that dramatic description by D&M of MBHB terminating D&M as a client, only to turn around and sue them on behalf of Sonos? Sonos’ filing suggests that there was no connection. In fact, Sonos alleges that D&M had basically stopped using MBHB.

“It was no secret, however, that D&M had ceased using MBHB for patent litigation matters after 2009 and had significantly reduced the amount of work it sent to MBHB. Indeed, reports show that D&M had largely stopped sending MBHB work after 2009 and instead moved on to using other, larger firms.”

Sonos included an exhibit that included a Reuters report that appeared to show a list of litigation D&M was involved with that listed other law firms as handling their intellectual property matters.

The timeline doesn’t work…

Furthermore, the decision by Sonos to sue D&M couldn’t have already been planned, Sonos’ filing maintains. The company needed to see the HEOS products marketed in the field before they could possibly know of the infringement – and that didn’t happen until months later.

Like the D&M filing, the Sonos opposition paper had been heavily redacted in certain sections. This led us to believe that there was some other issue, element, or person that is germane to their argument that we couldn’t see. However, their arguments appeared well presented…and supported by exhibits and legal precedent.

In Sonos’ discussion of legal standards, it can be difficult for a non-lawyer to gauge the strength of argument. Sonos’ attorneys referred to different cases than D&M had…but did add quite a bit more to the discussion of just what is a conflict. And just what various rules and laws apply.

Image from Sonos website

Image from Sonos website

Vague assertions & supported allegations…

What we learned from this discussion is that D&M’s Motion to Disqualify is not so unique. From one legal precedent, Sonos quoted:

“Disqualification motions must be ‘treated cautiously by courts because they have increasingly been used as one weapon in the litigation arsenal’… As a result, the party seeking disqualification has the burden of ‘clearly demonstrat[ing] that continued representation would be impermissible’… ‘Vague and unsupported allegations are not sufficient to meet [this] standard.'”

Surprisingly, court rules generally allow a law firm to represent two clients who compete economically, as long as the “type of problem” handled by the lawyer for a former client is a “factually distinct problem of that type” for the same lawyer with a different client. In other words, as long as the specific issues the lawyer is working on is different between the two clients.

Subliminal message from Sonos?

Somewhat humorously, the filing from Sonos makes one of its points using a case in which a Motion to Disqualify was initially granted…and then reversed. Why was this funny? Because it was a case involving Jackson Walker – D&M’s attorney. This was perhaps a not too subliminal message that D&M’s Motion to Disqualify is a strategy well known by their attorneys.

D&M did issue a reply to the Sonos opposition papers, but a quick read failed to turn up any new or creative argument. D&M essentially restated their initial assertions from which they say “reasonable inferences” can be drawn.

The judge has scheduled oral arguments on the Motion to Disqualify in June where both sets of attorneys will verbally argue their points in front of the judge. And it will be up to the judge to determine just what, in fact, the “reasonable inferences” are to be draw from these two very different versions of the situation.

About Ted

A sales and marketing specialist - primarily in the technology industry - I've experienced a sort of "circle of life" in business. I've been a mass merchant retailer, a specialty retailer, a specialty manufacturer, a large volume manufacturer, a distributor, and even represented sales representatives. Now the owner of a marketing company that works with a variety of businesses on improving their strategic marketing and business development - I analyze issues from all angles to develop holistic solutions.

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