In Specialized Tech. Resources, Inc. v. JPS Elastomerics Corp., the Appeals Court upheld a controversial trade secrets decision finding defendants liable for misappropriation of trade secrets despite a jury verdict to the contrary on a parallel common law claim. The Appeals Court also affirmed an award of over $8 million and an injunction that permanently enjoined defendants from using the trade secret and prohibited them from making the product at issue, by any means, for a five-year period.
The plaintiff developed a method to produce a specialized encapsulant used in making solar cells. Galica, the manager who oversaw the team that developed the method, left the plaintiff's employment to join JPS, one of its competitors. Within one year, the plaintiff lost 25 percent of its market share after JPS released a competing product using an identical process. The plaintiff filed suit against JPS and Galica, alleging breach of contract, misappropriation of trade secrets, and unfair and deceptive trade practices in violation of Massachusetts General Laws ch. 93A (Chapter 93A).
At trial, a jury decided the common law contract and misappropriation claims, and the Chapter 93A claim was reserved to the judge. The jury found that the plaintiff's method was a trade secret, but that the defendants had not misappropriated it. The judge disagreed, finding based on the same evidence that the defendants had misappropriated the trade secret, in violation of Chapter 93A. The judge awarded over $8 million, including damages, attorneys' fees, and costs, as well as injunctive relief. The defendants appealed.
On appeal, the plaintiff cited Massachusetts cases holding that a jury's verdict regarding common law claims is not binding on a judge who has reserved determination of a Chapter 93A claim in the same case. The defendants pointed to a lack of appellate authority permitting a trial judge to decide questions of fact in a manner contrary to a jury's findings in cases where statutory and common law claims are tried together.
The Appeals Court affirmed the lower court's decision, noting that the defendants had "waived at trial the argument they now press" and citing a prior Appeals Court decision that was directly on point. The Appeals Court also rejected defendants' argument that Chapter 93A was inapplicable because plaintiff's claims arose from the employer-employee relationship: "[T]hough Galica obtained the trade secret during his employment with STR and was bound by a confidentiality agreement as part of his employment contract, his misappropriation of the trade secret was actionable independent of his contractual obligations and accordingly may support a claim under Ch. 93A." The Appeals Court also held that the injunction was not improper in scope because "the method developed by JPS derived from specialized knowledge brought by Galica from STR to JPS, and particularly because the evidence suggested that JPS would not have been able to develop such a method independently, the judge's order enjoining JPS from production … by any means for a period of five years (a period equivalent to the time STR spent in development of its trade secret method) was justified."
The Appeals Court has provided a powerful weapon to employers pursuing former employees, and the competitors who hire them, for misappropriation of trade secrets and violations of Chapter 93A.