2 minute read | January.21.2016
In the wake of an 8-week trial, Caterpillar Inc. has received a $74M verdict against it in the Northern District of Illinois after a jury found it guilty of exploiting a supply contract with Miller UK Ltd. to steal the company’s trade secrets.
In what has been dubbed a “David v. Goliath” legal battle, family-owned Miller alleged that industrial giant Caterpillar, once Miller’s largest client, used the parties’ supply contract to gain access to Miller’s proprietary information on quick couplers. The couplers automatically attach new buckets to drilling machines without requiring the machine’s operator to leave the cab. This process saves excavation crews hours on a project, and allows employers to boost profitability.
Originally, Caterpillar had exclusive rights to sell the coupler in the United States, and at one point Caterpillar orders accounted for as much as 28% of Miller’s revenue. However, Caterpillar abruptly ended the relationship in 2008 after telling Miller it had designed its own coupler. The loss of such a key client caused Miller to lay off nearly 75% of its workforce.
In its complaint, Miller alleged Caterpillar used the information Miller shared with it pursuant to the parties’ confidentiality agreement to reverse-engineer its own product. Specifically, information regarding the couplers that Caterpillar had requested over the course of the contract’s performance. Miller ultimately gave Caterpillar access to documents, drawings, reports, and prototypes during the course of the business relationship and even provided Caterpillar with access to its manufacturing facilities and engineers. Miller had questioned whether Caterpillar was stealing its coupler design all the way back in 2005, but it did not become obvious to Miller until Caterpillar filed patent applications with the USPTO for a design nearly identical to its own.
Initially, Caterpillar’s legal team filed several preliminary motions and discovery requests, costing Miller millions of dollars in fees. However, Miller was able to fund its massive case against Caterpillar by using a litigation financing firm to front the cost of the lawsuit in return for 20-60% of any damages obtained.
Ultimately, the jury concluded that Caterpillar had in fact used its agreement with Miller to steal the company’s trade secrets and awarded Miller $74 million in damages. Currently, Caterpillar is considering whether it will appeal the verdict.
In the meantime, though, the case offers several valuable insights. First, the case serves as a reminder that even with confidentiality agreements in place, companies must remain vigilant that business partners are not using the parties’ contract for their own nefarious purpose. Second, the case shows that even one-time business partners can quickly become rivals. Finally, the case demonstrates that even smaller companies that have experienced a trade secret theft can fund a lengthy legal battle through creative means to protect their trade secrets.