The Securities and Exchange Commission is investigating whether a surge in call option trading on 3Com shares just hours before the announcement that Hewlett-Packard would take over the Marlborough, MA-based networking equipment maker for $2.7 billion was a result of insider knowledge of the deal, Bloomberg and other outlets are reporting today. Trading in call options—which guarantee the right to acquire a stock at a certain price—hit a 26-month high on November 11, just before the after-hours announcement of the acquisition. That “screams insider trading to the SEC,” Wayne State University law professor and former SEC attorney Peter Henning told Bloomberg, whose report was based on information from an unnamed source inside the agency.

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ZymoGenetics started really playing hardball with King Pharmaceuticals in August, and now a high-and-tight fastball has come right back at the Seattle biotech company.

The projectile in question is a lawsuit filed on November 2 by Bristol, TN-based King in the U.S. District Court in Eastern Tennessee; the suit accuses ZymoGenetics of false advertising, unfair competition, and other violations of federal and Tennessee law. King went so far to ask a federal judge to impose three temporary restraining orders to stop ZymoGenetics (NASDAQ: ZGEN) from making certain claims comparing the two drugs—and it was successful for a couple of days until Zymo got the restrictions overturned on Friday.

The suit, it seems, is at least partly a response to a move made in the summer by ZymoGenetics, maker of a drug for surgical bleeding, to try to get King’s rival product pulled from the market. For those not following all of the two companies’ maneuvering, here’s a quick summary.

The incumbent product, Thrombin-JMI, is made by Bristol, TN-based King Pharmaceuticals (NYSE: KG) for surgeons to dab or spray onto an organ that’s bleeding too much during surgery. The King product has been around in hospitals since 1995, and generated $255 million in sales a year ago. Surgical bleeding drugs (called topical hemostats in the operating room) are used in an estimated 1 million surgeries a year in the U.S.

But ZymoGenetics, whose own drug was approved in January 2008, has been arguing for years that it can do a lot better. The King drug is derived from clotting proteins called thrombins in cow blood. Since that’s from a foreign source, the human immune system recognizes it as such, and can spark a reaction that can lead to severe bleeding and death, ZymoGenetics has argued.

The challenger in this niche market, ZymoGenetics developed what it considers a safer alternative, recombinant thrombin, a genetically engineered copy of the human thrombin protein. Because the new drug is a human, rather than cow, protein, it shouldn’t provoke as many immune reactions or dangerous bleeding episodes, ZymoGenetics has contended. But ZymoGenetics has struggled to convince doctors that they need to switch, and it has backed away from earlier attempts to charge premium prices. The company forecasts that it will generate $28 million to $30 million in sales of the drug this year.

Back in August, ZymoGenetics found another venue besides the marketplace in which to wage this fight—the FDA. The company gathered evidence of two cases in which physicians attributed patient deaths to bad reactions on its competitor’s drug, and 23 more cases of severe complications. That was some of the ammunition contained in a 31-page citizen’s petition the company filed with the FDA, in which ZymoGenetics asked the agency to pull the drug off the market for the sake of public health. “There are physicians using Thrombin-JMI without a clear understanding of its risks,” said ZymoGenetics CEO Doug Williams in an interview with Xconomy in August. “There are at least three better alternatives in the marketplace now.”

King, a company with a $2.7 billion market capitalization, didn’t comment at the time. But it obviously decided that when ZymoGenetics started playing hardball, it was time to follow suit.

King challenged the ZymoGenetics citizen petition …Next Page »

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Stryker, the Kalamazoo, MI-based maker of orthopedic hip implants and other medical devices, said today that its biotech division in Hopkinton, MA, along with certain current and former employees, have been indicted by a federal grand jury for conspiracy to defraud the FDA.

The company (NYSE: SYK) disclosed on March 10 that its Stryker Biotech unit was the target of a federal grand jury investigation being conducted by the U.S. Attorney’s Office for the District of Massachusetts, according to a company statement released today. The charges include wire fraud, conspiracy to defraud the FDA, distributing a misbranded device, and making false statements to the FDA.

If the company is found guilty, it could face “significant monetary fines” and be barred from participating in state and federal healthcare programs, which could cause significant damage to Stryker Biotech’s business. “The company is disappointed with this action and still hopes to be able to reach a fair and just resolution of this matter,” Stryker said in a statement, adding it will have no further comment.

The company is charged with illegal promotion of OP-1 human bone growth product and Calstrux, according to a regulatory filing in March. Stryker said that certain former employees have pled guilty to charges related to the investigation, according to its statement in March. The investigation specifically focused on the number of patients treated with OP-1 under one of the Humanitarian Device Exemptions granted to the company. Those exemptions are sometimes granted to companies to market devices for less than 4,000 patients, even if the product hasn’t completed the usual full sequence of clinical trials. Stryker says it was accused of submitting false reports to the FDA regarding the number of patients who were treated with OP-1.

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Sequenom, the San Diego-based maker of laboratory tools and diagnostics, said today in a regulatory filing it has agreed to accept a $1 million payment from Ibis Biosciences, a unit of Abbott Laboratories, to settle a patent infringement lawsuit. As part of the deal, Sequenom (NASDAQ: SQNM) has granted Ibis a non-exclusive license to three mass spectrometry-based patents. Abbott acquired Ibis, a spinoff from Carlsbad, CA-based Isis Pharmaceuticals, for $215 million in December.

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Sonosite, the Bothell, WA-based maker of portable ultrasound machines, said today it will receive a $21 million upfront payment from General Electric as part of a settlement of all patent litigation between the companies. Sonosite will also receive an undisclosed royalty on U.S. sales of GE’s ultrasound systems that weigh less than 10 pounds, until one of Sonosite’s patents expires in 2016.  “It not only affirms the value of our patents, but also will enable the expansion of our research program for point-of-care ultrasound in medicine,” said Sonosite CEO Kevin Goodwin, in a statement.

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Today marked a milestone in the legislation relating to non-competes in Massachusetts. The Joint Committee on Labor and Workforce Development held its public hearing on two house bills that would attempt to redefine the rules governing “restrictive employee covenants and non-compete agreements.”

This effort began in early January when Rep. William N. Brownsberger (24th Middlesex District) filed House Bill No. 1794, which would effectively prohibit restrictive employee covenants in line with similar provisions in the State of California. Rep. Lori Ehrlich (8th Essex District) also filed House Bill No. 1799, which made significant clarifications to non-compete agreements in line with the State of Oregon. Subsequently, compromise legislation was drafted by Rep. Brownsberger and Rep. Ehrlich.

A good summary of the salient points of this bill can be found at the Trade Secret and Noncompete Blog that is run by Russell Beck of the Foley and Lardner law firm, who participated in the drafting of this legislation.

The hearings on non-competes began with introductions by Rep. Ehrlich and Rep. Brownsberger, who cited complaints over abusive and over-reaching non-compete agreements. They highlighted the fact that the current law is over 200 years old and the rewrite has been long overdue. Attorney Russell Beck and Robert Mantell of the Massachusetts Employment Lawyers Association provided a detailed summary of the compromise legislation and described the key provisions of the bill.

At one end of the spectrum, the committee heard from those who made the argument that the original Brownsberger-Jehlen Bill No. 1794 was “the only ethical thing to do.” The committee also heard testimony from those who felt that the “200 years of jurisprudence” was perfectly adequate and did not need any change.

Up until now, the discussion of these changes has been largely in the blogosphere, and the participants represented members of the high technology sectors of the industry. At the hearing however, members of the non-high technology sectors and small businesses presented strong argument against the proposed changes.

“Talented individuals are leaving the state in large numbers because they see non-competes as unfair,” said one concerned individual who favored changing the current law. “I am willing and able to work but no one will hire me because of the …Next Page »

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In the past week, the Northwest has seen its share of debt financings in medical devices and bio-IT, small funding deals and partnerships in Internet software, and mounting interest in an impending IPO.

—Amazon (NASDAQ: AMZN) rolled out a new mobile payments service that lets applications developers and distributors tap into the e-commerce giant’s one-click checkout system on mobile devices. As part of the rollout, Amazon has formed partnerships with mobile content distributors like Kansas City, MO-based Handmark, which sells games, apps, ringtones, and the like. Financial terms were not given.

—Seattle’s Theraclone Sciences formed a partnership with Tokyo-based Zenyaku Kogyo, worth up to $18 million over time, to discover antibodies that could protect millions of people in a flu pandemic, as Luke reported. Under the deal’s terms, Theraclone has given Zenyaku an option for exclusive rights to new flu antibodies in certain Asia-Pacific countries, while Theraclone gets an undisclosed amount of upfront cash and royalties on future product sales in Zenyaku’s territories.

—Seattle-based Omeros, the developer of anti-inflammatory treatments and other biotech therapies, is on the docket to go public this week and raise more than $80 million, as Luke reported. The company is also defending itself against accusations from its former chief financial officer that it filed false records with the National Institutes of Health and then wrongfully terminated him after he reported it to the board’s audit committee under the company’s whistleblower policy.

—Seattle-based Teranode raised $900,000 in debt financing, as Luke reported. The investors weren’t disclosed, although Bellevue, WA-based Ignition Partners has invested in the past. Teranode, a maker of software to organize life sciences labs, was founded in 2002 out of the University of Washington.

—Seattle-based Founder’s Co-op, a seed-stage investment organization, has backed two local Internet startups, Nearlyweds and BigDoor Media. Financial details of the deals were not announced, but Founder’s Co-op says it typically invests $250,000 or less in its portfolio companies.

—Redmond, WA-based Spiration raised $7 million in debt financing out of a $10 million offering, as Luke reported. The financing came from the company’s partner in Europe and Japan, Olympus Medical Systems. Spiration, which makes an implantable device to treat deadly lung diseases like emphysema and chronic bronchitis, has raised about $97 million since its founding in 1999.

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Seattle-based Omeros, the biotech company attempting to raise as much as $80 million in an initial public offering slated for next week, has been accused of submitting false timekeeping records to the National Institutes of Health for grant work, according to a federal lawsuit filed by the company’s former chief financial officer.

Richard J. Klein has accused Omeros of wrongfully terminating him from his job in January after he allegedly discovered false record-keeping on a federal grant and reported it to the board’s audit committee under the company’s whistleblower policy, according to a complaint filed in U.S. District Court in Seattle. That allegation arose in December, when Klein informed the audit committee that CEO Greg Demopulos and George Gaitanaris, the vice president of R&D, instructed several employees “to falsely record time on an NIH grant even though they were not actually working on the grant project for the recorded period of time,” according to Klein’s lawsuit.

Omeros, in a separate legal response to the complaint, denies that Demopulos instructed scientists to falsely record their work time. The company did admit that Gaitanaris provided instructions on time keeping practices that were later corrected, but the previous practices were based on Gaitanaris’ belief that they would end up billing the NIH for less time than was actually spent by Omeros staff doing the work, according to Omeros’s response. The company said it didn’t overbill the NIH for its work, and actually charged the government for less than all the time its people spent working on the grant.

Neither Klein’s complaint nor the Omeros legal response states how much the NIH grant was worth, or what specific work it required of the company. Klein’s complaint notes that Omeros “has been awarded millions of dollars” of such federal research grants.

A spokeswoman for Omeros said the company is unable to comment on the lawsuit because it is in the middle of a “quiet period” imposed by the Securities and Exchange Commission for companies that are seeking to go public. Two attorneys who are representing Klein didn’t immediately respond to e-mailed requests for comment.

Omeros, in a disclosure within its IPO prospectus, said its audit committee and outside legal counsel investigated Klein’s charges and discovered the company hadn’t submitted false claims to the NIH. It terminated Klein one month after he raised those accusations, although the company says …Next Page »

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A bill proposing restrictions on non-compete agreements in employment contracts in Massachusetts will have its first hearing on Beacon Hill next week, after nine months of discussion, revision, and compromise.

The state legislature’s Joint Committee on Labor and Workforce Development will hear comments on the bill, introduced by State Representatives Lori Ehrlich and Will Brownsberger, on October 7. Called the Noncompetition Agreement Act, the bill would make non-compete agreements unenforceable for employees of Massachusetts companies who earn less than $75,000 per year. The agreements—which are often used by employers to prevent former employees from going to work for competitors or from starting competing firms during the first year or so after they leave—would still be enforceable for employees who make more than $75,000, but only when employers can show the agreements are needed to protect trade secrets, confidentiality, or goodwill.

It’s the third such bill to circulate on Beacon Hill this year. Two related bills, one from Ehrlich that would have prohibited non-compete agreements for employees making less than $100,000 a year and one from Brownsberger that would have banned the agreements altogether, will technically be up for discussion at the hearing. But Ehrlich and Brownsberger are focusing their reform effort on the new, joint bill, a revised version of which was released this week.

The bill itself hasn’t changed much since the previous revision, which we wrote about in July; the big news then was that Brownsberger, in an effort to round up more support for non-compete reform and head off objections from the business community, had joined with Ehrlich in calling for restrictions—rather than an outright ban—on non-compete agreements. Russell Beck, an attorney with Boston-based Foley & Lardner who has been helping Ehrlich and Brownsberger …Next Page »

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Boston Scientific has agreed to pay $716 million to Johnson & Johnson to settle 14 lawsuits related to patent disputes in the field of interventional cardiology. Both companies make products in that field that seek to be less invasive alternatives for patients with cardiovascular disease, who otherwise might be headed toward open-heart surgery.

Natick, MA-based Boston Scientific (NYSE: BSX), said the money for the settlement will come out of its existing cash reserves, which stood at $1.19 billion at the end of June, when the company issued its most recent quarterly report with the Securities and Exchange Commission. The legal disputes go at least as far back as 1997, according to company filings. Despite the size of the payment, Boston Scientific didn’t get rid of all its legal issues with one fell swoop.

“We are pleased we have been able to significantly reduce the amount of outstanding litigation we have with Johnson & Johnson,” said Ray Elliott, Boston Scientific’s CEO, in a statement. “We continue to work with them to resolve other outstanding matters.”

Boston Scientific has been bracing itself for a big legal payout for some time. The company accumulated $1.27 billion as of June 30 for its estimated legal payments, after it lost a court ruling this year to J&J for an estimated $237 million and a $50 million settlement payment to inventor Bruce Saffran. Both of those disputes were related to stent products.

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If you spend much time in the business or legal world, “due diligence” is a phrase you hear a lot. It’s the polite term for the time you have to spend figuring out whether a potential client, vendor, investment, acquisition, or partner is legit or phony, smart or just slick.

Part of the process involves discreetly (or not so discreetly) calling around, trying to find people who know the person or entity you’re “diligencing.” But what if due diligence weren’t such a guessing game? What if there were a central marketplace where you could declare which type of information you need, pick an expert, and—for a reasonable fee—get an hour of private telephone consultation?

That’s the whole idea behind Zintro, a Web-based client-expert matching service being rolled out in beta form by serial entrepreneur Stuart Lewtan. The founder of Lewtan Technologies, a maker of financial analytics software sold to UK-based DMGT in 2004, Lewtan believes there’s a problem with existing professional-networking services such as LinkedIn. They’re great for staying in touch with your acquaintances, he says, but they aren’t really designed to bring about conversations between people who don’t already know one another.

“LinkedIn is an excellent tool, but it doesn’t’ really provide a good mechanism for reaching an agreement to talk,” Lewtan says. “Everything Zintro does is built around trying facilitate introduction, qualification, payment, and all the other aspects of connecting two people and creating a safe environment for them to communicate and exchange information for a fee.”

Here’s how Waltham, MA-based Zintro’s Web service works: Say you’re an investor and you’re thinking about buying a big chunk of stock in A123Systems, the Watertown, MA-based battery maker that went public last week, but first you want to know more about lithium ion batteries. You sign up for a “client” account at Zintro.com and fill out a form describing your information needs. Zintro uses what Lewtan calls “fuzzy search” algorithms to comb its database of experts, who all fill out detailed profiles when they sign up for the service. Zintro sends your inquiry to appropriate experts who indicated they know something about batteries, electric cars, or material science.

These experts are then free to respond with a brief proposal outlining their rates and their qualifications for talking about A123. From your Zintro dashboard, you can sort through their proposals; if you need more details, you can request them from the experts via Zintro’s internal e-mail system.

Once you settle on an expert, Zintro helps you schedule a phone call, and charges your credit card or PayPal account for the amount of the expert’s fee, plus Zintro’s 30 percent introduction fee—say, $100 for the expert plus $30 for Zintro. The funds go into an escrow account, and Zintro provides a dial-in number that both parties can call at the agreed time.

Once the call is over and both parties confirm how much time was used, the fee is released to the expert. There’s also an escape hatch: if you …Next Page »

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In what is shaping up as the battle of San Diego’s biotechnology tools titans, Life Technologies (NASDAQ: LIFE) has filed a patent-infringement suit against rival Illumina, claiming that some of Illumina’s best-selling genetic-sequencing products violate Life Tech’s intellectual property.

The suit, filed in U.S. District Court in Delaware, claims that certain Illumina products, including the Genome Analyzer and the second-generation Genome Analyzer II, infringe upon three Life Tech patents. The suit seeks an unspecified amount in damages, and a permanent injunction restraining Illumina (NASDAQ: ILMN) from further infringement. If granted, the injunction would prevent Illumina from selling its equipment.

Telephone and e-mail messages to an Illumina spokesperson were not returned.

Illumina’s Genome Analyzer products are a mainstay of the company’s genetics analysis business, and are important to Illumina’s growth. The $50,000 whole-genome analysis that Illumina began offering to the public in June uses the Genome Analyzer. The company has stated that one of its corporate goals is to make the Genome Analyzer the industry standard for genetic analysis. Last year, the device accounted for the bulk of Illumina’s $64.8 million increase in instrument sales.

Life Technologies, formed last November through the merger of Invitrogen and Applied Biosystems, claims it is the leader in the genetic sequencing business. The Carlsbad, CA-based company had revenue of $3.1 billion in 2008, dwarfing Illumina’s 2008 revenue of $570 million.

Listed as plaintiffs along with Life Tech are patent owners Alexander Chetverin and Helena Chetverina, both of Russia; The Institute for Protein Research of the Russian Academy of Sciences; and William Hone of New York. According to the suit, the patents cover certain methods of amplifying and expressing nucleic acid, a building block of DNA. Applied Biosystems had an exclusive license to the patents, which issued in the late 1990s.

Illumina subsidiary Solexa is also named as a defendant.

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Vlingo, the Cambridge, MA-based startup that makes a suite of speech-to-text applications used by millions of iPhone, BlackBerry, and Nokia mobile device owners, is about to get a brain transplant of sorts. It said today that it will largely abandon a core speech-recognition engine developed by IBM and maintained by Nuance Communications in favor of a system from AT&T Labs in New Jersey.

As part of the shift, says Vlingo CEO Dave Grannan, Vlingo and AT&T have agreed to a long-term strategic alliance. Vlingo’s speech scientists will be able to modify and improve the source code for the AT&T technology, called Watson, while AT&T will take a minority ownership stake in Vlingo. All of Vlingo’s applications will be running on top of the AT&T speech-recognition system by the first quarter of 2010, Grannan says.

Vlingo’s own speech scientists have developed software that exploits information collected from users—the way a Bostonian’s pronunciation of a dictated phrase like “I parked my car” might differ from a New Yorker’s, for example—to build statistical models that help improve speech-recogition accuracy over time. These models provide supplemental input that helps to guide a core speech-recognition engine as it transforms speech sounds into text. Vlingo didn’t build its own core engine—it has long licensed that part of its system from IBM.

The switch from IBM’s engine to AT&T’s is a “best of all worlds” situation for Vlingo, in Grannan’s words. For one thing, he says, the Watson technology simply works better than the IBM recognizer. “Watson is superior on speed and base-level accuracy,” he says. Once the transition is complete, users of Vlingo’s iPhone, BlackBerry, and Nokia apps should notice fewer wrong guesses in the transcriptions of their utterances. Grannan says they’ll also see a few new features, such as automatic punctuation, that Vlingo can now add because it will be able to tinker with Watson’s innards.

But just as important, the switch will help Vlingo disentangle itself from its strained relationship with Nuance.

Burlington, MA-based Nuance (NASDAQ: NUAN) is one of the Boston area’s biggest high-tech firms, and it is the world’s largest specialized provider of speech-related technologies. It offers software for mobile speech recognition that competes directly with Vlingo’s. In June 2008, after losing out to Vlingo on a contract to supply Yahoo with speech-recognition technology for its oneSearch service, Nuance hit Vlingo with a lawsuit alleging that …Next Page »

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Hopkinton, MA-based EMC (NYSE: EMC) announced today it has agreed to buy Kazeon Systems, a Mountain View, CA, maker of “eDiscovery” software for litigation support inside large corporations and law firms. EMC said Kazeon will become part of its Content Management and Archiving business unit, and that Kazeon’s technology will complement the company’s existing line of SourceOne eDiscovery tools. The terms of the deal weren’t disclosed.

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Yesterday morning, Wade wrote a story about the recent settlement agreement in a class-action lawsuit involving Connecticut-based Webloyalty, which runs various discount programs offered to consumers as they wrap up e-commerce transactions. The case involved allegations that Webloyalty violated state and federal laws by failing to disclose some details about its offerings, such as the monthly charges that showed up on credit card bills after customers agreed to the programs. In some cases, customers said they didn’t even know they had signed up for a program at all.

Now, it’s important to note that Webloyalty has not admitted any wrongdoing. It maintains, in fact, as Wade wrote (I’m quoting Wade here, not Webloyalty): “that the details about its charges have always been clear in the fine print and in the follow-up e-mails it sends to subscribers…”

Wade’s story has more details on the case and settlement. But I’d like to flag one point that has to do with changes Webloyalty has made in the way it markets its programs. The company was very helpful to us in our reporting and provided a fascinating graphic detailing those changes. I found the graphic extremely instructive about how marketing programs work and the way words and placements might influence outcomes and perceptions. I think you will, too.

You can find it here, or just click on the thumbnail image accompanying this story.

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Back in 2007, Xconomy ran a story by freelance contributor Seth Shulman about a class-action lawsuit unfolding against Norwalk, CT-based Webloyalty, an online marketing company. The comment section of that story became something of a clearinghouse for ongoing complaints against Webloyalty, which runs many of the discount programs pitched to consumers as they are finishing e-commerce transactions.

If you’ve ever bought a movie ticket online at Fandango or Movietickets.com and then been offered a $10 rebate, you might well have seen a Webloyalty offer. The problem—as scads of consumers alleged to Xconomy, the Connecticut Better Business Bureau, the New York Times, and other organizations—was that by accepting such rebate offers, many people unwittingly signed up for discount programs that carry a $10 monthly subscription price, fees that customers often didn’t notice on their credit card bills until months or years later.

Well, now there’s finally something for Webloyalty’s critics to be happy about. On June 30, a federal judge in Boston approved a settlement agreement in a class-action lawsuit alleging that Webloyalty broke state and federal laws by failing to disclose details such as the monthly charges. Webloyalty maintains that the details about its charges have always been clear in the fine print and in the follow-up e-mails it sends to subscribers, and it admitted no wrongdoing in the settlement. But under the terms of the settlement—which went into effect on August 14—the company agreed to change the way it markets its programs, and to partially or fully refund Webloyalty members for each program in which they were enrolled. (That includes programs known as Reservation Rewards, Shoppers Discounts & Rewards, Members Specials, Buyer Assurance, Distinctive Privileges, PC Protection Plus, Travel Values, Travel Values Plus, Classmates Rewards, and Wallet Shield.)

Up to 20 million people who joined Webloyalty’s programs between September 30, 2000, and September 30, 2008, will be eligible for the refunds, according to David George, a plaintiff’s attorney in the suit quoted in “The Haggler,” the New York Times’ consumer-protection column. If you’re one of these people, you can’t dally too long: members of the settlement class (meaning any U.S.-based Webloyalty subscriber who didn’t explicitly opt out of the settlement before May 29, 2009) must submit claim forms by January 11, 2010, to get their payments, according to this website created by Garden City Group, a Melville, NY, company that specializes in administering class-action settlements.

In comments to Xconomy, Beth Kitchener, Webloyalty’s vice president of corporate communications, said “we fully support the judge’s decision” to approve the settlement agreement. “Given that the settlement terms are consistent with our commitment to maintaining high standards in our marketing and customer service practices, we believed it to be in the best interests of our company, our clients and our members to resolve this matter and move forward,” Kitchener said.

It’s hard to gauge what material effect the settlement will ultimately have on Webloyalty. If all 20 million members of the settlement class were to apply for payments of $10 or $20, that could translate into a hit of $200 million to $400 million. But “the actual amount of payments is dependent on …Next Page »

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If you’ve seen from the inside how technology startups get created and funded, you know that law firms are involved at every step in the process. But to outside observers, it might be surprising just how central a role the attorneys can play—not just by helping entrepreneurs with incorporation papers and the other legal rigmarole of starting a business, but by connecting them with the right venture capital firms and making sure investments are structured fairly for both the founders and the venture funds. And while nobody likes to pay legal fees, a good outside attorney can literally save a company when things start to go south: an experienced firm can help straighten out founder-investor conflicts or line up emergency financing, for example.

Given that Boston was the birthplace of venture financing, it’s probably not surprising that it’s also home to a large group of law firms specializing in company creation and financing. Indeed, you can’t go far in the startup world without bumping into names like Cooley Godward Kronish, Edwards Angels Palmer & Dodge, Foley Hoag, Foley and Lardner, Goodwin Procter, Mintz Levin, Proskauer Rose, Ropes & Gray, Nutter, and Wilmer Hale (see tables on this page and page 4). Several of these firms are home to former partners from Testa Hurwitz, the Boston firm that more or less invented the modern corporate technology practice; Testa launched and represented scores of Boston-area startups, venture capital funds, and technology giants between its founding in 1973 and its dissolution in 2005.

Last week I sat down with Tom Burton and Lewis Geffen, two attorneys from the corporate practice at Mintz Levin’s Boston office, to hear more about how law firms fit into the local innovation ecosystem. Founded here in 1933 by Herman Mintz, Benjamin Levin, and Haskell Cohn—three Harvard Law School graduates turned away by Boston’s white-shoe firms because they were Jewish—Mintz Levin now has nearly 500 attorneys, making it Massachusetts’ fourth-largest law firm. It has long represented Biogen Idec—one of the first big biotechnology success stories—and was intimately involved in AOL’s acquisition of Time Warner in 2000. The firm also has major operations in San Diego. And under Burton’s direction, it has developed a booming practice representing clients in the energy and clean technology sectors on both coasts. Many of the firm’ clients turn up regularly in these pages, including EnerNOC, Greatpoint Energy, FloDesign Wind Turbine, General Catalyst, and Rockport Capital.

At Mintz Levin’s office near San Diego’s Carmel Valley, partner Carl Kukkonen tells Bruce, “We represent a lot of small, pre-funded venture-backed companies as well as multi-nationals.” Kukkonen, who was among the lawyers to open the San Diego office in 2006, adds, “I like to tell people I was working with solar, fuel cell, and battery companies before I ever heard of the term ‘cleantech.’”

From Mintz Levin’s 43rd-floor conference room at One Financial Center in Boston, one can peer down on the Federal Reserve building, the Custom House Tower, and every downtown landmark. It’s a far cry from the brick warehouse district of Kendall Square where we scribes at Xconomy spend most of our time—but the visit was an interesting reminder, for me, of all the high-level networking, negotiation, advice, and other homework that goes into getting a technology startup off the ground.

In my interview with Burton and Geffen, portions of which are transcribed below, we covered everything from the state of the cleantech industry and the challenges of working for both startups and venture funds to non-compete agreements and that old chestnut, the difference between East Coast and West Coast investing cultures.

Xconomy: Explain to me how Mintz Levin wound up developing an energy and cleantech practice.

Tom Burton: One thing that’s interesting about Mintz is the entrepreneurial nature of the firm itself, and the way it moves into markets that other firms haven’t placed a bet on. I was pitched that back when I joined the firm in 1996, and I chose Mintz over a lot of safer bets like the Skadden Arpses of the world.

Lewis Geffen: At Sherman and Sterling in New York, where I spent my first five years, no one ever thinks “I have to produce business somehow.” At Ropes & Gray or Wilmer Hale, new associates are simply given work. Whereas we teach “business development 101″ to our associates. It’s part of our fabric here.

TB: For me, all I knew was that I wanted to build something that hadn’t been built before. I wasn’t sure what it was going to be, but I trusted in the firm’s pitch, and took advantage of some luck. When I was a second-year associate, I brought in my first client, who …Next Page »

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Northwest tech giants Amazon and Microsoft have joined a coalition of companies, nonprofit groups, and individuals to work against a proposed settlement by Google regarding its thousands of scanned books according to an article in yesterday’s New York Times. The group, which includes new Microsoft ally Yahoo, will work to derail the settlement between Google and groups like the Authors Guild and the Association of American Publishers about Google’s right to digitize and publish books from libraries online. Google was first sued over its book scanning in 2005. The settlement reached sets up a way for Google to display and sell books online but is of concern to antitrust lawyers including some in the Department of Justice. The coalition against the settlement is tentatively being called the Open Book Alliance.

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The argument over non-compete clauses in employment agreements is front and center in most discussions over ways Massachusetts can square up better against Silicon Valley. Proponents of getting rid of non-competes argue that they curtail innovation. Fearful of getting sued when they leave their employers, so the theory goes, would-be entrepreneurs either forego starting their own companies or move to places like California where the courts don’t enforce non-competes.

Massachusetts state Representative Will Brownsberger and Xconomist Tim Rowe, CEO of the Cambridge Innovation Center, have both advocated getting rid of non-competes. Brownsberger filed a bill early this year seeking to outlaw them altogether, but last month teamed with fellow representative Lori Ehrlich to file a compromise bill that would limit, but not outlaw non-competes. Just five days before news of the compromise bill came out, Rowe contributed a post to the Xconomist Forum detailing his own views on why non-competes should be banned.

Rowe’s post attracted quite a few comments. But this past Saturday, Brownsberger kicked off a new round of discussion in the comment stream by raising a question about Rowe’s interpretation of venture investment trends in California and Massachusetts.

Rowe responded right away, and both dived deeper into venture data to come to an interesting and very collegial understanding that they also shared with readers. One conclusion was that if you look at venture investment data over the past 15 years, there really isn’t evidence one way or another that non-competes hinder Massachusetts startups. As Rowe wrote: “I agree with Will’s analysis: measured from 1995-2009, the ratio of VC investment in California to New England is almost exactly flat, and since non-compete policy didn’t change over this period, we can’t infer anything about non-competes relative to VC investment.”

Their discussion raised other questions—including wondering why Massachusetts seems to have lost share in more recent years to California after gaining ground from 1995 to 2002. In the end, Rowe and Brownsberger seem to agree that the venture data itself is ambiguous, and that it’s important to look at other information—such as the actual experiences reported by employees, investors, and business leaders—to gauge the impact of non-compete agreements. Since this all happened on a summer Saturday, and since they are looking for some more insights from others, I thought I’d point it out. You can find the comment stream here.

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Relations appear to be increasingly strained between Biogen Idec (NASDAQ:BIIB) and the Irish drug company Elan, its partner for the distribution and development of the multiple sclerosis drug natalizumab (Tysabri). Elan said today that it has filed suit against Biogen over the Cambridge, MA-based biotech firm’s objections to Elan’s deal announced last month with affiliates of health products giant Johnson & Johnson (NYSE:JNJ).

Elan’s deal with Johnson & Johnson gives Elan the option to get financing from J&J to acquire Biogen’s rights to natalizumab if Biogen is acquired or undergoes some other change of control, according to Elan. And, according to Reuters, Elan’s $1.5 billion deal with J&J also gives J&J the option to purchase Biogen’s 50 percent stake in the Tysabri business if there’s a change in control at Biogen. Biogen has told Elan that Elan’s deal with J&J breaches the partnership agreement for the drug between Elan and Biogen. Elan disagrees. A Biogen spokeswoman wrote in an e-mail that the company has no comment about Elan’s recent legal action. The lawsuit Elan filed in federal court in New York seeks “declaratory and injunctive relief” that essentially confirms that Elan’s deal with J&J complies with its collaboration agreement with Biogen.

Biogen has been the subject of buyout rumors in recent years, and in late 2007 ended an official search for a buyer after the activist investor and Biogen shareholder Carl Icahn pushed for a sale of the company: Biogen said that December that it didn’t receive any qualified acquisition bids during the sales process. Biogen’s collaboration with Elan has factored into such buyout discussions, at least in part because of the importance of natalizumab to Biogen’s business. The drug, which generated $588.6 million in 2008 revenue for Biogen, is one of the company’s top three products, along with MS drug interferon beta-1a (Avonex) and rituximab (Rituxan) for rheumatoid arthritis and non-Hodgkin’s lymphoma. Biogen and Elan, which discovered natalizumab, entered their development and marketing agreement in 2000.

Elan issued a statement that said: “This is the same agreement we have been operating under for the last nine years. It is unfortunate that, because of Biogen Idec’s actions, Elan was left with no alternative but to seek court intervention to protect its interest.”

Biogen markets natalizumab for multiple sclerosis in the U.S. and Europe, and Elan has responsibility for selling the drug in the U.S. for the intestinal disorder Crohn’s disease. Biogen has said in previous financial reports that it has pinned much of its near-term revenue growth on increased sales of natalizumab.

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