Selectica Goes Nuclear?

When we checked in January, Selectica had "exercised the poison pill" as the expression goes. Logically, shouldn't one say that it has swallowed the poison pill, thereby carrying the metaphor forward?

Anyway, it had doubled the number of shares of common stock held by all of its shareholders except for the would-be acquirers, Versata and Trinity.

It had also decided that it would be the plaintiff in the inevitable litigation, rather than waiting to become the defendant. Selectica filed in Delaware Chancery Court looking for a declaratory judgment patting it on the back for this.

On January 16, Versata and Trilogy jointly filed their answer to the complaint.

As I read the answer, the lawyers involved seem to ave worked rather hard to come up with an intensified form of the "poison pill" metaphor for what Selectica has done. They came up with "nuclear pill" and "reloaded nuclear pill." Sounds rather awkward, but hey ... I'm sure they gave this literary endeavor their best shot.

Appended to the Answer is a Counterclaim, which is the course in such a battle.

Here's some emphatic language from the Counterclaim.

"The case of Selectica reflects a 'how-to' for directors seeking to breach and rebreach the fiduciary obligations owed to shareholders of a public company. Selectica has a long and undistinguished history. It began auspiciously in March 2000, however, when the company commenced an initial public offering at an offering price of $30.00 per share. On the first day of public trading, per share prices increased over 371% and closed at $141.23 per share. Since that promising beginning, the company has executed a poorly-managed business strategy and has experienced consistent losses. Indeed, the nearly nine-year public company record of Selectica is replete with unfulfilled and unrealized promises. From a trading high of $154.44 in March 2000, Selectica’s stock price has utterly disintegrated, reaching a record-low closing price of $.69 on January 5, 2009 (since that date, trading in Selectica stock has been halted)."

Part of the problem, the defendants continue, is that Selectica has spent "time and resources resolving patent infringement claims related to its use, licensing and sales of its sales configuration software. Between April 2004 and October 2007, Selectica was required to defend itself in two suits claiming infringement of patents held by Trilogy and Versata."

Whoa! I hadn't been aware that patent infringement was a part of this case at all. My bad.

Frankly it seems bizaare to me that party A, owning an equity interest in party B, should sue B for patent infringement and then complain in a shareholders' lawsuit that B violated its fiduciary duty by spending time and money to resist that lawsuit. It means what? that the defendant in a patent infringement lawsuit can have a fiduciary duty to allow a default judgment?