Even the mighty Microsoft fell after this high school dropout took after it
Morgan Chu is the master of the calculated risk. Whether at a poker table or in the courtroom, he seems to know when to put all his chips on the table, literally or metaphorically.
“When I was in law school, I’d play poker at least two full nights a week,” he recalls. “And when I say full nights, I mean I’d start at seven, play to sun-up, then go to class and then that next night start at seven again and play until at least four or five.” The classes he managed to attend between hands, by the way, were at Harvard, not Hollywood Upstairs School of Law.
Chu and I are speaking in his office at Irell & Manella. He’s a regular-looking guy, dressed, on casual Friday, in a Calloway golf shirt and khakis. His is a corner office, naturally, offering a stunning view of the Los Angeles Country Club and the hills of Bel Air, and decorated with souvenirs from clients, such as a Curious George doll and an array of silicon chips manufactured by Novellus Systems. He has thick black hair, allowed to grow perhaps a smidgen longer than a conservative length, and his relentless physical activity is probably one factor in his looking considerably more youthful than his 52 years.
When it comes to poker, Chu prefers table stakes, which means that at any time in the game, regardless of the set limit on bets, a player can push in all his chips and force everyone else to do the same to remain in the hand. “A lot of money can change hands,” he says with typical understatement.
Another time Chu took a chance that resulted in a lot of money changing hands (pending appeal, that is) also depended on a calculated risk. You may have heard of it: the fifth-largest jury verdict in the United States in 2002, and the second largest in California (largest overall, after the judge presiding over Bullock v. Philip Morris Inc. reduced the tobacco giant’s damages to $28 million), a little thing called City of Hope v. Genentech. It was a $500.2 million award, including $200 million in punitive damages.
Chu’s case was a breach of contract suit arising out of Genentech’s licensing of patents based on inventions of two City of Hope scientists. Genentech had 27 agreements with third parties based on City of Hope’s work, about which a court ruled that it failed to notify the cancer research institute. The victory came on retrial after a 7-5 hung jury in Genentech’s favor the first time around.
“We went through every piece of that first trial, both what we presented and what we didn’t present, and asked, ‘Should we do this differently?’” Chu explains. “The major changes had to do with what might be viewed by trial lawyers as risky, and that is going after the credibility of Genentech and some of their key witnesses.” Some of these included the former chairman of the board of Genentech and the company’s first general counsel.
Press reports noted that the jury’s decision hinged on Chu’s gambling. Speaking of Genentech executives whom Chu had put on the stand as adverse witnesses, the jury foreman told the L.A. Times simply, “We didn’t believe their testimony.”
Chu grew up in a middle-class Long Island suburb with his parents, both immigrants from war-torn China, and two older brothers. Their mom had a degree from MIT but worked as a sales clerk “and never complained about it,” Chu recalls. Dad was a college professor. “It was an upbringing that certainly valued scholarship,” says Chu’s brother, Steven. Their older brother, Gilbert, had the highest cumulative average ever in the high school they attended, Steven says. “Morgan and I felt a lot of pressure to do well,” he remembers.
The pressure paid off. Aside from their brother’s own considerable professional accomplishments, Gilbert and Steven have a thing or two to boast about as well: Gilbert earned a Ph.D. from MIT and a medical degree from Harvard; today he teaches biochemistry and medicine at Stanford. Steven did OK, too — he was awarded the Nobel Prize for physics in 1997.
But the parental demands, in the shortterm anyway, may have backfired somewhat: In their youth, Steven and Morgan each rebelled in his own way. Steven refused to go to school for a couple of months in the ninth grade; Morgan, after the family had moved to Southern California, found his local high school unchallenging and wasn’t afraid to make sure everyone knew as much. “It seemed I was wasting time,” he says today. So in a true/false history exam, Chu deliberately answered every question wrong, scoring a zero. (The teacher was not amused.) Soon after that he just dropped out.
Later, exploiting a loophole intended for scholarship athletes — though not those without high school diplomas — he convinced someone in the UCLA admissions office to go to bat for him and managed to wrangle his way in.
As a student, Chu became active in the political movements of the 1960s, particularly the anti-war movement. Again showing his penchant for understatement, Chu explains his reasoning: “I did not think it was a very good war for the United States to be involved in.” He also worked to establish the first ethnic studies programs at the university, which were among the first in the nation. “I cared passionately about what I was doing,” he says.
Thinking he would be a professional student all his life, Chu enrolled in a Ph.D. program at UCLA, studying urban educational policy and planning. “I never thought of being a lawyer growing up,” he says, something Steven confirms. “He started in engineering.” Later, “learning some law just seemed like the thing to do at the time,” Morgan says today. So he ambled into Harvard. A summer job at Irell & Manella led to his starting work there for good, following a year-long clerkship for a judge, in 1977. If you’re doing the math on this, no need to recheck your figures: Chu earned a B.A., an M.A., a Ph.D., and a J.D. in eight years. And, oh yeah, he picked up an M.S.L. (master scholar of law) along the way, too.
The same inclination toward learning that attracted Chu to the life of the professional student satisfies him as a lawyer. Working a patent case requires an intimate understanding of complex issues, often relating to technology, and Chu says he relishes coming to know the ins and outs of new concepts in, say, software or biotech.
“I get to sit down with the smartest people in the world on these matters and ask a lot of dumb questions, and they’ll spend all day with us answering them,” Chu says. “These people would not offer that service to the richest person in the world, because it’s a waste of their time. So I get to learn this fascinating new technology, what they’re doing and how they’re solving problems — on a personal tutorial basis — and at the end of the day they’re paying me?!”
“Morgan has this ability to dive into the technical issues of a case,” says Ann Baskins, general counsel of Hewlett-Packard, whom Chu currently represents. “Our engineers respect him, and our intellectual property lawyers appreciate that he can talk the technical issues at a very high level. But he can also explain the case to our business side without talking down — and he has the same skill in a courtroom.”
It’s not just big-money cases that get Chu excited — to the point that he can’t sleep and so finds himself up at 3 a.m., hard at work. (“It’s easier to get up, work out, and focus rather than lie awake thinking I should go back to sleep,” he says.) Several years ago, for example, Chu was asked by the former chief justice of the California Supreme Court, Malcolm Lucas, to take on a pro bono death penalty case that had already been upheld by that Court. “If anything, that made it more attractive,” Chu recalls. “I’ve never seen a case that I thought was too tough.”
Chu’s strategy was to file a habeas corpus petition with the federal court. It climbed up to the 9th Circuit Court of Appeals, where Chu’s team (he is always deferential to his co-workers when discussing his many victories in the courtroom) was successful, and the Supreme Court eventually upheld that Court’s ruling. It’s not often these days that the United States Supreme Court and the Ninth find much to agree on, but in this instance there was a full reversal on guilt, special circumstances and the death penalty — the first time that had happened since California reinstated execution.
The quixotic challenge of an impossible case, which Chu often turns into a Lombardian victory, has its attractions. The confrontational atmosphere of a trial is also “a thrill” to him. But frequently what Chu finds most rewarding about his job is the people he works with, and for. Asked about the City of Hope monetary award, he points instead to an executive at the institute with whom he worked closely. (The man values his privacy so Chu asked that we not use his name.)
The executive worked in pediatric oncology as a young man, but when he was given managerial duties, he insisted that he still be able to treat children. “He left my office one Sunday afternoon after working all day, and I asked what he was doing,” Chu remembers. “He said he was going to see patients.” The doctor also has 11 adopted children, all with disabilities. Chu just shakes his head thinking about it. “What an amazing individual,” he says. “Imagine working with someone like that.”
Another client of whom Chu is particularly proud is Stac Electronics, which had a patent dispute with Microsoft. Stac was a tiny company; its principals were very young at the time. When its trouble with the software behemoth started, Stac was forced to lay off a sizeable portion of its employees, according to news reports. “My job is to advise them of all the risks, all the expenses, all the burdens, how it might not work out,” Chu says.
And here several of the impulses in Morgan Chu’s life — the need to do the right thing, the thrill of taking on a challenging case, and the tendency to risk everything to fashion the desired outcome — all came together. Chu believed that this case should be tried in court. If he was unsuccessful, however, Stac would cease to exist as a company and it would be very difficult for its executives to get jobs in the industry.
“At the end of the day, they asked me what I thought,” Chu remembers. “I said, ‘I don’t think it’s right [what Microsoft did].’ And they said, ‘OK, we’ll risk it all.’ It’s like table-stakes poker. They decided that the only way to proceed was to take all the chips we have on the table and push them in. I get to work with and represent people like that.”
A California court forced Microsoft to pay Stac $120 million in 1994.
—Paul Tullis has written for Los Angeles, LA Weekly, the Los Angeles Times, The New Yorker, McSweeney’s, Wired and others.