Employer Receives $23 Million Award for Employees' Misappropriation of Trade Secrets
Ohio defense contractor, Innovative Technologies Corp. (ITC), was awarded a $23 million jury verdict when three of its employees breached their confidentiality agreement, were faithless servants and misappropriated trade secrets to a rival company. (Innovative Techs. Corp. v. Kenton Trace Techs., Ohio Ct. C.P., No. 2003CV03674, verdict entered 1/4/08).
During the final fourteen months of their employment, the three employees set up their own company, Kenton Trace Technologies (KTT), and secretly competed with ITC for lucrative government contracts. In a prior summary judgment ruling, the Common Pleas Court of Montgomery County, Ohio, ruled that the employees breached their confidentiality agreements and covenants not to compete by participating in business activities that directly competed with ITC. The court also issued an injunction against the former employees, barring them from direct competition with ITC.
Undeterred, the former employees worked around the injunction and conspired with a rival firm, Advanced Management Technology Inc. (AMTI), to share ITC’s confidential information and trade secrets. As a result, AMTI was awarded a major service contract with Wright-Patterson Air Force Base over ITC.
The January 4 jury verdict held that ITC’s former employees had given AMTI an unfair advantage in the marketplace, and granted ITC “disgorgement of compensation by [the] faithless servants.” Furthermore, the court found AMTI liable for tortious interference with business relationships, civil conspiracy, and theft of trade secrets, and ordered AMTI to pay almost the entire $23 million verdict.
During trial, AMTI defended its actions by stating that it was “not the only company to do business this way,” and that recruiting disloyal employees and the confidential information they maintain was a common practice in the marketplace. ITC’s attorney responded by arguing that the size of this verdict should make similarly inclined firms reconsider.
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Deborah S. Adams is a member of Frost Brown Todd LLC and practices in the labor and employment law practice group. She represents management in the areas of employment discrimination and wrongful discharge.