and Reich & Tang
] are embroiled in a legal battle over the cash management business they're hanging on to even as they exit the money market mutual fund business
On June 23 in the New York State Supreme Court for the County of New York (i.e. Manhattan), Island Intellectual Property
and Double Rock Corporation filed suit
against Reich & Tang and Lydon (president and CEO of Reich), accusing the Natixis
affiliate of going back on a licensing agreement that was part of the deal under which Reich & Tang bought Double Rock's FDIC-insured cash management business in 2011. The initial complaint
was redacted, with some details blacked out, but the unredacted complaint
was filed three days later. (Here's more information
on the case.) Island is the patent-holding arm of Double Rock, and Double Rock, in turn, is the holding company led by Reserve founder Bruce Bent
and his son, Bruce Bent II
Reich spokesman Frank Bonanno and Richard Mahoney, a spokesman for Double Rock, both declined to comment on the suit.
Per the 19-page unredacted complaint, Reich bought Double Rock's $12-billion AUM FDIC-insured cash management business for $15 million up front, plus an ongoing license agreement with Island that amounted to Reich paying the greater of 15 percent of revenue (for the FDIC-insured business) or 0.5 basis points each quarter. The Double Rock folks estimated that the license agreement piece of the deal with earn them about $92 million in total. Yet Double Rock claims that Lydon fought to renegotiate the licensing agreement every quarter once the deal closed, and that Reich stopped paying the quarterly licensing fee altogether this spring (missing its April 30 payment for Q1 2015).
The change followed a 2014 U.S. Supreme Court decision, Alice Corp v. CLS Bank International
that invalidated some software patents." Lydon, the complaint says, emailed Bruce Bent II on May 5, 2015 and called Island's patents "violative of public policy and void under Supreme Court precedent."
Double Rock, represented by John Dellaportas
and Catherine Murphy
of Morgan, Lewis & Bockius
, is asking for Reich to make good on the licensing agreement (both the missed payment and going forward), plus pay at least $80 million in damages, plus pay nine percent interest, plus pay Double Rock's legal expenses. Of the $92 million in total value for the licensing agreement, Double Rock estimates that about $80 million of it remains unpaid.
Neil Anderson, Managing Editor
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