Discovery

Ajaxo v. E*Trade: How (Not) to Prove a Reasonable Royalty for Trade Secret Misappropriation

The latest appellate decision in the nearly 20-year legal battle between Ajaxo and E*Trade highlights the importance of expert discovery and a well-developed trial court record for a plaintiff attempting to claim reasonable royalties for trade secret misappropriation.

The saga between Ajaxo and E*Trade began back in the late 1990s, with Ajaxo, a six-person company, approaching E*Trade, seeking to support its wireless access and trading business.  In response, E*Trade asked Ajaxo for a technical paper and live demonstrations, during which E*Trade’s engineers peppered Ajaxo with questions.  One E*Trade senior engineer, Dan Baca, made a copy of Ajaxo’s technical binder.  After E*Trade sent Ajaxo a draft letter of intent—with everything but the dollar amount filled in—E*Trade had a change of heart and told Ajaxo it was simply too small to be an E*Trade partner.  Instead, E*Trade acquired these services a short time later from Everypath, a company that it had been meeting with simultaneously, and where Dan Baca started to work shortly after attending the Ajaxo meetings. READ MORE