By Scott Graham, From The Recorder

SAN FRANCISCO — A split panel of the Federal Circuit refused Thursday to let Sidley Austin and another firm off the hook for waiting too long to appeal a $40 million patent judgment against AT&T Inc.

Sidley chairman Carter Phillips argued last fall that the failure to act should be excused because the district court mislabeled electronic notices for the orders that started the clock running. But Federal Circuit Judges Kathleen O’Malley and Evan Wallach ruled Thursday that AT&T and its counsel were responsible for monitoring orders on the civil docket, regardless of any glitches in electronic notifications.

“The civil docket … had a complete description of those orders had AT&T bothered to check the docket, as it should have done,” O’Malley wrote in Two-Way Media v. AT&T.

Judge Timothy Dyk dissented, saying AT&T never received proper notice under the Federal Rules of Civil Procedure.

The decision, and the oversight that led up to it, is likely to be costly for AT&T. The company posted a $40 million bond last year to prosecute the appeal, and Colorado-based Two-Way Media can collect once appeals are exhausted, according to documents in the case. Phillips declined to comment on Thursday’s ruling.

Two-Way Media owns patents on audio and video streaming that were developed by Netcast Communications Corp. Backed by Susman Godfrey and Heim, Payne & Chorush, the company sued AT&T and subsidiaries in Texas federal court. A jury found that AT&T’s U-verse Internet service infringed Two-Way’s patents.

AT&T filed four motions for new trial and JMOL under seal. U.S. District Judge Orlando Garcia denied all four on Nov. 22, 2013, but three of the electronic notices stated that the orders were granting motions to file under seal. Garcia’s clerk corrected the labels on the civil docket two days later, but did not send out new electronic notices.

AT&T, which was represented by Sidley and Cedillo, Davis & Mendoza, says it did not realize until Jan. 15, 2014—several weeks after the time to appeal had expired—that Garcia had denied all of its post-trial motions. The company moved the next day to reopen the appeal period, but Garcia refused, ruling that the attorneys were responsible for reading orders received from the court.

O’Malley wrote Thursday that while she might have decided the issue differently, Garcia did not abuse his discretion. Electronic notices had been sent to 18 lawyers and legal assistants on AT&T’s team, and any one of them could have read the orders by clicking on links in the notification. Plus, Garcia had properly labeled the fourth order denying a new trial, and a separate order granting Two-Way Media’s bill of costs.

“Pointedly, costs are only to be awarded to a prevailing party,” O’Malley wrote. “An order assessing costs was a clear indication that all matters relevant to the question of whether [Two-Way Media] was a prevailing party had been resolved.”

Dyk argued in dissent that AT&T never had proper notice of Garcia’s orders because the docket entries did not reflect their substance as required by Federal Rule 79(a). “A docket entry that does not comply with FRCP 79(a) does not trigger the time for appeal,” he wrote.

Heim, Payne & Chorush partner Leslie Payne argued the appeal for Two-Way Media.

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Judge Kathleen O’Malley United States Court of Appeals for the Federal Circuit

For more on this story go to: http://www.therecorder.com/id=1202721126767/Missed-Deadline-Sinks-ATampTs-40-Million-Patent-Appeal#ixzz3V38E6ND3