After a months-long delay due to an outbreak of COVID-19 during the first trial, a federal jury in Texas awarded a $152 million verdict—including $120 million in punitive damages—in a trade secret misappropriation case between rival software development companies.
Case Summary
In 2019, software company ResMan LLC ("Resman") sued its former customer Karya Property Management LLC ("Karya"), alleging that Karya provided its third party software consultant, co-defendant Expedien, with unauthorized access to Resman's trade secrets in order to help it develop a competing product. Resman's proprietary software is used to manage apartment buildings throughout the United States. In the breach-of-contract lawsuit, Resman alleged Karya gave Expedien access to its trade secrets so that it could develop its own rival property management software.
On March 18, 2021, the jury agreed with Resman and found that Expedien and Karya both misappropriated Resman's trade secrets. The jury found that Karya breached its agreement with ResMan, which prohibited providing access to third parties. The jury also found that Expedien tortiously interfered with the Resman and Karya agreement by accessing Resman's software and then using it to build a competing product.
The lawsuit is styled ResMan LLC v. Karya Property Management LLC et al., case number 4:19-cv-00402, in the U.S. District Court for the Eastern District of Texas.
COVID-19 Disruption
In addition to the verdict amount, the Resman case is also notable for the significant impact COVID-19 had on the proceedings. The case was originally tried in November 2020 and was one of only a few to proceed with in-person jury trial in federal courts around the country as COVID-19 restrictions initially lifted. US District Judge Amos Mazzant initially suspended the trial after five days of testimony when a juror tested positive for COVID-19. Judge Mazzant ultimately declared a mistrial after 15 trial participants tested positive.
After the outbreak, Judge Mazzant pushed all of his remaining 2020 trials to 2021. Shortly after that, all federal districts in Texas announced plans to postpone their remaining 2020 trials.
No COVID-19-related issues disrupted the second proceedings in March 2021.
Takeaways
By its $120 million award of punitive damages, the jury signaled that misappropriation of trade secrets can result in significant verdicts. The Eastern District of Texas also maintained its reputation as a hotbed for trade secrets litigation, and as a venue where companies can reach the trial stage—pandemic-related disruptions aside—in comparatively short periods of time.
Originally Published by Seyfarth Shaw, March 2021
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