Reminder–Trade Secrets Cases Can Cost BIG (Particularly When You Cheat)!

By John Alan Doran

Employers often ignore, or horribly underestimate, the cost of making a mistake about trade secret appropriation/misappropriation, as well as restrictive covenants (such as no-competes, no-hires, no-solicits) and confidentiality agreements. A Minnesota Court of Appeals recently provided employers with a wakeup call in Seagate Technology, LLC v. Western Digital Corp.

Seagate brought an action against Western Digital and a former Seagate employee (Dr. Sining Mao) for misappropriation of trade secrets. In their defense, Mao and Western Digital relied on power point slides that supposedly proved that trade secrets at issue in the case were public knowledge before Mao left Seagate to join Western Digital. After determining that the relevant power point slides were actually ginned up on Western Digital’s system and that Western Digital must have known, the arbitrator held that Mao and Western Digital actually fabricated the power point evidence for the purposes of the case. The arbitrator imposed sanctions against Western Digital and Mao, which included entering judgment in favor of Seagate for $525 million in damages plus $100 million in interest. The Minnesota Court of Appeals recently upheld this judgment, denying an appeal by Western Digital and Mao.

While we can assume Western Digital and Mao will try to appeal this case to the Minnesota Supreme Court, it remains an unpleasant reminder that trade secrets cases can be serious, big-ticket litigation. And, while we shouldn’t need to be reminded of the corollary lesson from this case, it never pays to cheat in litigation.

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