Q: From your understanding of this entire case right now how strong or weak is Satyam’s position?

Basheer: It's one of the trickiest legal cases that I have seen because there are about three contracts that we are talking about here and all three contracts are subject to the laws of different jurisdictions. So it’s certainly one of the trickiest contractual legal matters that we have around here. It’s very difficult to tell at this stage that who is going to win at the end but if the allegation of forgeries is true; I think some of the cases are really going to rest on that. Obviously someone has to pay up for that if there was forgery because of which Upaid lost on the patent litigation in the US, they have to give a royalty-free licence and what they are seeking now is basically that Satyam is to blame.

So they are trying to make Satyam pay for it and you have all these different contracts. And in the end, if the forgery allegation proves true and if there is ambiguity in the contract, the judge is pretty much going to go on the side of the person that relatively seems to be coming with clean hands. So it’s a 50-50 situation; on the legal interpretation it might tilt against Satyam at the final stage.

Q: Before I get into legal details of whether or not this case will actually head to the US, the concern right now is the quantum of money we might be talking about a figure of USD 1 billion has been doing the rounds. Do you think that in case such as this which involves this kind of IP issues - that indeed could be the size of claims?

Basheer: In short, Upaid’s claim is that - we have settled this patent case and because our patent case was weak and it was weakened because of something that we thought went wrong at Satyam’s end. These assignments from Satyam should have been an order; there should not have been any forged document. But something messed up and because of the forgery issue we had settled this patent case, if we didn’t settle it and if it went through the trial and we got damages, the US is one of the most liberal damage granting jurisdiction since so far patent cases are concerned, which is why patent attorneys get paid the most in the US.

So it’s not just damages arising out of infringement but it can go up to three times to disprove it was intentional. So if you look at treble damages and some of the decisions from the US, damages are in the range of millions and billions. So if that holds out and Upaid claims holds out that we lost on this patent litigation because of you, we have to settle on what we think are unfavourable terms i.e. we have to give out licenses to the infringers on royalty-free basis and therefore we lost ‘X’ amount of money, then it's theoretically possible that that damage could be in the range of million or a billions.   

Q: Just address two key issues that the market has, whether you agree with the quantum that has been talked about which is fairly large and the question mark that has been raised in terms of corporate governance issues, whether or not you may have to start making some provisions over the next few quarters?

Vadlamani:  Yes, I heard  what Mr. Basheer was basically saying that at least from our side it is a very simply straight forward contract while we are here talking of the issues like IP, Satyam’s business model is nothing to do with IP - we are into the business of providing the software solutions to our customers and that is what exactly we have done in this case and we have developed this application and delivered to the customer and we got paid for it and as part of the overall contract, our obligation is to provide the required documentation to the customer for him to take on from there. That is what exactly we have done in those days. The customer came here with the lawyer and he took all the documentations from us and we have provided to their satisfaction and then only they have paid for us. So from our point of view, it is a very simple, straight forward, plain vanilla software solution contract that we have with Upaid, and the consequential things which happened subsequent to our delivery. I don’t think we have any role to play and the patent rejection or infringement there may be many reasons and nothing to do with forgery or whatever they are releasing.

Why should Satyam Forge, what is the upside here for Satyam? What is that we are gaining, am I selling this patent to somebody else? No, we have legally given the ownership of whatever we have developed, we have given it to them, to their satisfaction in those days and they are fully convinced of it and they paid and after all we are talking of a contract value of USD 8 million to USD 10 million work which we have done over a 3-4 year period of time. It is not a big contract at all and we have developed that obligation and gave it off to them and they paid to us, so that is all done as far as we are concerned.

Q: I don’t think the concern right now is about whether or not Satyam was looking to get some kind of IP rights - the concern is like you pointed out about forgery and the fact that two employees who worked for Satyam, then quit and joined other organizations and worked with the same IP if you may or a common horizon, at this point in time where does the status of the case lie and what are the chances that it actually heads to Texas?

Vadlamani:  That is what I am saying - the onus of taking required documentation lies with the customer. So we are not in the business of getting patents for our customers and we don’t know that particular aspect. We generally tell our customers, you please take whatever documentation you want and then you go forward from there - that is what exactly we have done and as per the contract terms, the customer pays us only after he is fully convinced about the quality of the product we delivered and also the required documentation is done.

From our point of view, we have delivered whatever is required to be done and absolutely we don’t agree with their allegation at all that there is some forgery etc. First of all, there is no modified intention here and also why Satyam should forge those things and what is it that Satyam is gaining, so that is what is going to be contest in the court definitely.

The next step is that we are in discussion with our lawyers and I am sure that we will be taking appropriate steps and this particular thing has been posted in Texas Court somewhere in the mid-next year. There is one more year to go; so we are at least on the merits of the case and whatever work we have done and our contractual obligations and all that, we are very confident that we will be able to very easily defend our case.

Q: Apparently there was another agreement signed in 2002 terminating all relationships - was that indeed the agreement reached and does that still hold?

Vadlamani:  Absolutely. Based on that only, we basically said that as part of that settlement agreement - one of the clause seeks jurisdiction to be in London - that is when we basically approached the London Court saying that as per the settlement agreement, it has to be settled in London.

So that is what has been suggested now that it can be taken up in Texas. That is based on some agreement which we had entered into in 1997-99, by our subsidiary company. So they were taking reference to that and saying that this can also be settled in Texas Court - so what really has happened so far about which so much publicity has been taken by the other party is just the jurisdiction. Now the jurisdiction is in Texas Court and now we are in consultation with our lawyers and we will be taking the next steps.  

Q: That’s what the management point of view is. But also it is apparently within the jurisdiction of the Texas Court. What would you have to say to all the clarifications given forth?

Basheer: I think Mr. Vadlamani is broadly right - that it’s very contentious contractual or is broadly similar; it will be applied in the similar ways in the US and in the UK by and large and so if we were to go by the UK finding, the UK court has basically said this - (a) the exclusive jurisdiction does not vest with the English courts here, that the jurisdiction clause in the settlement agreement signed by these two parties is not binding in this case because these disputes fall outside the ambit of that settlement agreement and therefore the parties can agitate it before the Texas court.

I think it's also important to point out a flag up here that the court clearly said that this dispute in someway falls outside the settlement agreement and so the dispute at the Texas court is going to turn on. If the Texas court follows the English court and they find that its outside the terms of the settlement agreement, then the dispute is going to turn on - factually was there a forgery, factually whether that forgery impacted a patent rights of Upaid and the third factor they are going to look into whether that impact on Upaid has to be compensated by Satyam and that’s what its going to rest on once it proceeds in the Texas court, unless of course, Satyam manages to appeal once again to the House of Laws from the court of appeal and the House of Laws finds that the English court shall have exclusive jurisdiction here and this matter is covered by the settlement agreement and the parties cannot agitate any matter arising from it.

Q: How long do these processes take?

Basheer: It just depends on how long council wants to delay it. The US courts are relatively much quicker. But one has to also note that there is an appellate system and it could go up on appeals after appeals. So it’s very difficult to say. There is a first instance where you could have a full-fledged trial a year to two years and then it could keep going up in appeals. So it’s difficult to tell us at this point as to how long it’s going to take.

My guess is in most litigations of this sort at some point the parties’ estimates as to who is going to win or loss and typically they will drive down on a settlement. So I wouldn’t be surprised if this matter gets settled in the next couple of months to a year.