Monday, July 21, 2008

Magma - Security Class Action

There is an interesting report about a securities class action against US company Magma Design Automation on law.com today. Magma and Synopsis had been fighting a patent infringement suit for several years when the inventor (Lucas van Ginneken) on the Magma patents admitted that he had come up with the ideas in the Magma patents whilst a Synopsis employee. Even worse, he claimed that the Magma management knew all about it. Not surprisingly Magma's stock dropped from $9.52 a share to $5.58 a share in a single day.

A number of Magma shareholders clearly did not think much of this - and filed a security class action against Magma management. Last week the judge gave preliminary approval to a payment of $13.5 million to settle the case.

Law.com report note that this type of action is rare in a patent-related matter since the facts are generally known and shareholders are able to make an informed decision about whether to invest in a company - even if patent suits are pending. What made this case so unique (and the shareholder soooo angry) was the statement by the inventor that Senior Management clearly knew what was going on.