On May 20, 2015, a federal jury in Houston found a former research scientist and an entrepreneur liable for misappropriation of trade secrets and conspiracy to misappropriate trade secrets. The jury awarded more than $12 million to the plaintiff Quantlab. This award was in addition to the $28.5 million settlement Quantlab reached weeks earlier with four other ex-employees and their employer SXP Analytics.
The dispute began in 2007 when Quantlab claimed that six of its high-level employees joined with the entrepreneur, forming a competing company, SXP Analytics, "for the purpose of exploiting the strategies, technologies and other intellectual property of Quantlab." According to Quantlab, the ex-employees stole source codes for proprietary trading strategies and forecasting software developed by Quantlab and enlisted the help of Quantlab software developers to implement the program at SXP. Quantlab also alleged one of the former employees was romantically involved with the entrepreneur, and the entrepreneur persuaded her to act as a "super mole" at the company. Quantlab claimed the "super mole" went to the office late at night and made unauthorized copies of Quantlab's confidential and proprietary information. When Quantlab discovered the theft, it notified the FBI which eventually executed a search warrant at the homes of the defendants and SXP's offices. No criminal charges were ever filed, but the dollar amounts of the verdict and prior settlement illustrate that juries are more than willing to protect a company's trade secrets and compensate them for their theft.
This verdict should be a cautionary example to employees with access to secret proprietary information. They will need to think twice before stealing trade secrets and using them to set up a competing business. Companies need to follow Quantlab's example and pursue all available legal remedies if a former employee exploits or disseminates the company's proprietary information. Quantlab's $40 million payday because of ex-employees' wrongdoing sends a strong message to all former employees that violating trade secrets laws could put a significant dent in their bank account!
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