Verdicts

Titanic Texas Trade Secrets Verdict Contested as Colossal Collusion

A $700 million jury award for trade secrets misappropriation and fraud is the product of a collusive scheme to deceive the jury, claims title insurance and valuations provider Amrock, formerly known as Title Source, in its recent bid for a new trial.

The blockbuster award to technology start-up HouseCanary arose out of its 2015 contract to provide Amrock with access to its proprietary app designed to generate real estate valuations for house appraisers based on a proprietary automated valuation model. Several months later, Amrock accused HouseCanary of breaching the contract by failing to provide any usable products. Amrock terminated the agreement and sought a declaratory judgment in Texas state court that it need not pay HouseCanary the contracted $5 million in annual access fees.  HouseCanary countersued, claiming that Amrock used HouseCanary’s products and offerings without paying for them, collected a “critical mass” of HouseCanary’s proprietary data, and ultimately used that information to “secretly replicate” HouseCanary’s protected technology and intellectual property. HouseCanary ultimately convinced the San Antonio jury that Amrock lied about its intended purpose in entering the contract and that Amrock misappropriated HouseCanary’s data and technology to develop competing property analytics and software. In March 2018, the jury awarded HouseCanary $200 million for trade secrets misappropriation, $400 million in punitive damages for the misappropriation, $34 million for fraud relating to the contract, and $68 million in punitive damages for the fraud. In October 2018, the judge upheld the award and ordered Amrock to also pay $29 million in prejudgment interest and $4.5 million in attorneys’ fees. READ MORE

Seedy Business: Chinese Scientist Sentenced to Ten Years for Stealing Proprietary Rice Seeds

In 2013, U.S. Customs and Border Protection agents caught researchers attempting to smuggle a $75 million trade secret from the United States to China.  Unlike the trade secrets we usually discuss, the trade secrets in tow were rice seeds.  But not just any rice seeds:  these valuable seeds were genetically modified to create proteins used to treat gastrointestinal disease, antibiotic-associated diarrhea, hepatic disease, osteoporosis and inflammatory bowel disease.  READ MORE

SOUR GRAPES: Fig Spread Verdict Under DTSA Doesn’t Stick, Argue Jam Company Defendants

In a dispute over ripped off recipes, counsel for victorious plaintiff Dalmatia Import Group hailed the jury verdict as the first of its kind under the Defend Trade Secrets Act, as we previously reported.  Not so fast, sulked the defendants, Dalmatia’s erstwhile manufacturer Lancaster Fine Foods and distributor FoodMatch, in a filing this month.  While acknowledging their defeat under the Pennsylvania Uniform Trade Secrets Act, the defendants nevertheless urged  the court not to enter judgment under the DTSA.

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HALLOWEEN TREAT: Judge’s October 31 Order Adds $21 Million to Jury’s $70 Million Award for Trade Secret Theft

On October 31st of this year, a district judge in Massachusetts granted a motion for enhanced damages in a theft of trade secrets case, adding an additional $21 million to a $70 million jury award.

The theft of trade secrets case pitted CardiAQ Valve Technologies, Inc., a Delaware corporation and a unit of Edwards Lifesciences Corp., against Neovasc Inc., a Canadian medical device company. In June 2009, CardiAQ hired Neovasc to manufacture part of an experimental heart valve that CardiAQ was developing – a trans-catheter mitral valve (TMVI), a replacement heart valve that can be implanted using a catheter rather than by open-heart surgery. The parties signed a non-disclosure agreement. READ MORE

500,000 Lines of Source Code: The New “Intangible Property”

Sergey Aleynikov’s six-year trade secret odyssey through all possible configurations of litigation, civil and criminal, federal and state, may at long last have come to an end after the New York Supreme Court recently overturned his only surviving criminal conviction for unlawful use of secret scientific material. We here at Trade Secrets Watch have closely tracked Aleynikov’s journey, recently reporting on his newest victory, and previously covering his convoluted trials and tribulations. In particular, prior to the recent New York Supreme Court decision, the Second Circuit overturned Aleynikov’s convictions under the Economic Espionage Act (EEA) and the National Stolen Property Act (NSPA), which also led to a change in the EEA legislation. READ MORE

UPDATE: A New Top 10 Disclosed Trade Secret Settlement

A new trade secrets settlement has shaken up our top 10 disclosed settlements of all time.  Business Logic, a Chicago-based developer of financial software, reports that the investment firm Morningstar, Inc. has agreed to pay it $61 million to settle a trade secrets action.

According to Business Logic’s press release, the company alleged that Morningstar and its subsidiary, Ibbotson Associates, violated a contract and took Business Logic’s intellectual property in a case involving software for managing 401(k) retirement accounts. READ MORE

Of Documents and Dumpsters: The Sixth Circuit Affirms Convictions for Theft of Hybrid Car Secrets from GM

Last month, the Sixth Circuit affirmed the convictions of co-conspirator couple Yu Qin and Shanshan Du, who were convicted in 2012 of trade secrets theft.  A jury in the Eastern District of Michigan had found that Du absconded with GM’s proprietary documents, passing them to Qin, who then used them to start his own business.

The trade secrets comprised the specially engineered and highly complex “motor control source code” of a hybrid car—the program that directs how and when the electric motor of a hybrid car runs.  The jury bought the government’s argument that the hybrid car secrets were on their way to China via Qin and Du, both engineers. READ MORE

Good Things Come To Those Who Wait: $26 Million

Trade secret misappropriation cases often are won or lost quickly and early at the preliminary injunction stage of the case.  However, today we report on the results of  a slow moving, long-running trade secret case that instead followed the adage, “good things come to those who wait.”  This case, MSC Software Corp. v. Altair Engineering, Inc., recently concluded with a largedamages verdict for the trade secret owner who just would not quit.

The plaintiff, MSC Software, is a global provider of integrated enterprise simulation software solutions – software that is capable of mathematically simulating real-world physical objects, enabling companies to test objects and assemblies without actually having to create a physical prototype.  MSC’s Adams The Multibody Dynamics Simulation Solution software, for instance, is used by engineers to study loads and forces on mechanical systems, information used in the design and development of automobiles and complex machinery. READ MORE

GETTING AN $800,000 ASSIST FROM THE GOVERNMENT: Referring Trade Secret Theft For Criminal Prosecution Pays Off

We rely on the federal government for a lot of things, but helping a corporation recover attorney’s fees is not something that immediately comes to mind.  With a recent federal court opinion in the Northern District of California that made executive search firm Korn/Ferry International $827,983.25 richer (although the order likely will be appealed), more corporations may think about getting an assist from federal prosecutors in trade secret actions, rather than taking on the burden themselves in civil litigation. READ MORE

TRO LLC – GET IT? Sprung from Prison, Hacker Creates Hedge Fund That Shorts Stocks of Companies with Security Vulnerabilities

Self-proclaimed Internet troll and hacker Andrew “weev” Auernheimer has big plans now that he’s been sprung from prison.

We identified Auernheimer’s imprisonment and appeal as one of the top trade secret stories of 2013: A member of “Goatse Security,” Auernheimer discovered a vulnerability in AT&T’s website associated with 3G service for the iPad in June 2010.  He and an associate figured out that if they sent a HTTP request with a valid ICC-ID (data found on an iPad’s sim card), they could retrieve the email address associated with that ID from the AT&T website.  Fellow hacker and associate Daniel Spitler wrote a script that “slurped” the email addresses of 114,000 users (the script was called the “iPad 3G Account Slurper”).  Weev shopped the addresses and news of the breach to Gawker, which took the bait.  The FBI got wind of the exploit, however, and their investigation led to a criminal complaint in 2011 and a 2013 conviction on cybercrime charges that carried a 41-month prison sentence.  Nevertheless, Auernheimer claimed to have used only industry-standard practices and that he and his associates “tried to be the good guys.” READ MORE