Settlement in ACS v. Leadscope

October 8th, 2012

ChemBark InvestigatesOn the heels of a split decision in the latest round of appeals, the American Chemical Society and Leadscope, Inc. have reached a settlement that puts an end to the decade-long lawsuit and results in the ACS shelling out $22.6 million to the company founded by three former ACS employees. As one would expect, the settlement brings appreciable benefits to both sides in the case. The ACS will get a discount on the $26.5M judgment handed down by the Ohio State Supreme Court, while Leadscope will be able to cash in its chips without having to worry about losing a larger chunk of its pending award (i.e., from another adverse decision on appeal). Leadscope also gets the rights to the disputed intellectual property involved in the case.

Here are excerpts from two statements issued by the ACS on the settlement:

The American Chemical Society, Leadscope, Inc., and its three founders have reached a settlement of the litigation between them dating back to 2002. As a provision of the settlement, the parties have agreed that all right, title, interest, and ownership in the Leadscope software and products that were the subject of the litigation belong exclusively to Leadscope. ACS will make a payment of $22,633,377.00 to settle and resolve all claims. Each party is pleased to put an end to this longstanding dispute.

and

The ACS Board of Directors, comprised of the elected representatives of the Society’s members, authorized the filing of this case more than a decade ago. In reaching its decision, the Board considered recommendations that ACS file suit from its Governing Board for Publishing (overseeing CAS and ACS Publications) and two law firms, one with nationally recognized patent expertise. Although ACS believed in the merits of its suit, the Columbus Ohio jury that heard the case during the nearly eight-week trial in 2008 found against the ACS on its claims. In addition, the jury found in favor of Leadscope and its three founders on three counterclaims against ACS. By the time of the Ohio Supreme Court’s decision, the value of the trial court’s judgment, including the jury’s verdict, interest, and fees, exceeded $45 million.

In this settlement, the parties have agreed to resolve this dispute and to release each other from any further liabilities.

As a result of prudent financial stewardship, ACS is able to satisfy the full settlement amount with a portion of its cash and investments. Therefore, this payment will not impact the Society’s member dues; extensive products, programs, and services advancing chemistry; staffing levels; or the ability of ACS to achieve its mission.

ACS appreciates and acknowledges the strong support it received in the Ohio Supreme Court through briefs submitted on ACS’s behalf by the State of Ohio, the Ohio Chamber of Commerce, the Ohio State Bar Association, the Ohio Manufacturers’ Association, and the Ohio Council of Retail Merchants.

ACS remains committed more than ever to achieving its vision of “Improving people’s lives through the transforming power of chemistry.”

There are a couple of things that should be highlighted from these statements, as well as some omissions. First, note that the ACS’s Board of Directors had the ultimate authority to pursue this lawsuit. This is a great example that elections have consequences, and the Board members are who should be held accountable for throwing away $22.6 million (and risking much more). It should also come as quite a surprise that a loss of $22.6M “will not impact the Society’s member dues; extensive products, programs, and services advancing chemistry; staffing levels; or the ability of ACS to achieve its mission.” How is this even possible? When did $23 million become a drop in the bucket for our non-profit society? Something does not sound right, and I can’t believe that $23M wouldn’t have done a lot of good in terms of improved ACS programming.

C&EN, the official organ of the ACS, ran a story that did little more than parrot the official statement. I wish a reporter at the magazine would take the elevator upstairs and find out where this money is really coming from—or at least find out how a $23M loss can do nothing to impact ACS programs. But I won’t be holding my breath for another story. Instead, I’ll just lament the limitations of state-run media.

Finally, it should be noted that $22.6M just covers what the ACS is obligated to pay Leadscope. The question of how much the ACS has shelled out in legal fees remains unanswered. After ten years of litigation, including multiple appeals, I imagine the legal fees add up to a pretty penny. Of course, whatever astronomical figure they amount to, I’m sure the cost will not impact “the ability of ACS to achieve its mission.” Right?

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7 Responses to “Settlement in ACS v. Leadscope”

  1. prunesmith Says:

    Man, I hope they hold a workshop on financial planning in New Orleans. My 401k could certainly use some of this “prudent financial stewardship” they speak of! Magical!

  2. Paul Says:

    Yeah, I hope they start sending me ten spams a day about Webinars on investing.

  3. Phillip Says:

    According to this site http://bit.ly/WLdSvj, ‘At December 31, 2011, the American Chemical Society had approximately $1.1 billion in assets and annual operating revenues of about $500 million’

    Of that, the vast majority comes from CAS and SciFinder, plus journals revenue. As a rough guess, 165000 members paying $175 in dues is a drop in the ocean ($28 million). That is why it won’t affect dues etc – the ACS has enough of a cushion to soak it up.

    Whether or not this is the right situation for the ACS to be in is a completely different argument…

  4. Rachel Pepling Says:

    Hey Paul, we at C&EN have the same questions and do, indeed, have a longer feature about Leadscope in the pipeline. Stay tuned.

  5. Paul Says:

    Excellent. I look forward to it.

  6. Paul Says:

    A fantastic chart on ACS expenses in a new post on the Depth-First blog:

    http://depth-first.com/articles/2012/10/09/follow-the-money-american-chemical-society-expenses-at-a-glance/

  7. ACS Sheds More Light on Leadscope Case | ChemBark Says:

    [...] The post is written in a Q & A format that might be an homage to the “tough questions” survey that ChemBark recently sent to the candidates for ACS President. While it would appear that the ACS both asked and answered the questions found in the post, some of the questions match those posed in the presidential survey and in ChemBark‘s posts about the recent ACS v. Leadscope verdict and settlement. [...]


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