Damages Issues In Trade Secrets Cases (Part I)

We are blogging on “Non-competes, Trade Secrets, Fiduciary Duties, and the Inevitable Disclosure Doctrine.” Mark Oberti has prepared a detailed paper on all of these issues, which can be found here.

In Wellogix, Inc. v. Accenture, L.L.P., __ F.3d __, No. 11–20816, 2013 WL 2096356 (5th Cir. May 15, 2013), the Fifth Circuit U.S. Court of Appeals affirmed a verdict of more than $40 million in a trade secrets misappropriation case. Wellogix developed software to sell to companies in the oil and gas industry. The software was designed to help them manage complex projects. Wellogix contracted with Accenture for Accenture to market the software, and shared its source code and other technology with Accenture, subject to a confidentiality agreement. Later, however, Accenture, SAP, and BP worked together to develop a competing software, and accessed Wellogix’s technology and source code to do so. Wellogix sued all three companies — BP, SAP, and Accenture. Only Accenture went to trial. After a nine day trial, the jury awarded Wellogix $26.2 million in actual damages, and $68.2 million in punitive damages. The district court judge, the Honorable Keith Ellison, entered judgment on the jury verdict, with the exception of remitting the punitive damages award to the amount Wellogix had requested at trial, $18.2 million. Accenture appealed.

The Fifth Circuit affirmed the judgment against Accenture in all respects. It found that there was sufficient evidence that Accenture had indeed misappropriated Wellogix’s trade secrets. As for the actual damages award, Wellogix presented proof that venture capital firms had valued Wellogix’s worth at approximately $26.2 million before Accenture’s misappropriation, and zero after the misappropriation. Wellogix also presented evidence that Accenture itself had indicated in documents that the BP work alone was worth more than $20 million, so long as it could keep Wellogix out of it. An expert testified that Wellogix’s sole worth was from the technology that had been misappropriated, and evidence showed that during the relevant time, Wellogix was the only company with the technology at issue. Regarding punitive damages, the court found there was sufficient evidence that Accenture acted with malice, citing to a plethora of e-mails Accenture employees wrote boasting of its ability to “harvest” Wellogix’s technology and its desire to interfere with Wellogix’s business relationships, even though it knew that its conduct was legally questionable.

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