A pair of high-profile trade secret decisions that issued in recent months, one by an arbitrator and one in federal district court, have resulted in historic damages awards. Both cases involve the familiar scenario of a former employee who is hired by a competitor and allegedly misappropriates and discloses proprietary and confidential information of his former employer.
In a trade secret case alleging misappropriation of confidential information and trade secrets by a former Seagate Technology employee who went to work for rival hard-drive manufacturer Western Digital, an arbitrator in Minnesota recently awarded plaintiff Seagate $525 million in damages, not including still-to-be-determined prejudgment interest. The case originated back in October 4, 2006, when Seagate filed a complaint against Western Digital and one of its employees, alleging that the employee had given Western Digital access to Seagate’s confidential information and trade secrets. The lawsuit was stayed and sent to arbitration in 2007. In 2010, the arbitrator allowed Seagate to amend its claims and add allegations based on the alleged misappropriation of additional confidential information. Both companies recently announced the arbitrator’s preliminary decision with Western Digital’s CEO vowing to “vigorously” challenge the decision.
Seagate’s considerable arbitration award follows closely on the heels of what may be the largest trade secret decision ever issued, in which Delaware-based DuPont was awarded $920.3 million in damages against a South Korean fiber company. In E.I. Du Pont De Nemours and Co. v. Kolon Industries, Case No. 3:09CV58- REP (E.D. Va.), DuPont alleged that Kolon purposefully solicited information from DuPont’s former engineer and marketing director about the making of Kevlar®, a DuPont-branded synthetic fiber, despite knowing that the former employee was prohibited from disclosing such information under confidentiality agreements. Kevlar is used in a wide variety of applications, including military body armor and bullet proof vests for law enforcement officials. Following an investigation by the FBI and a raid of the former employee’s home, he pleaded guilty to the theft of trade secrets and was sentenced to 18 months in prison. In September 2011, a jury in the U.S. District Court for the Eastern District of Virginia (Richmond) awarded $920.3 million in damages to DuPont upon finding that Kolon had “willfully and maliciously” stolen trade secrets and confidential information relating to the Kevlar fiber and had incorporated it into their competing product. In November 2011, the trial judge tacked on an additional $350,000 for punitive damages—the maximum amount allowed under Virginia law.