The Cost of Misconduct

Submitted by patentadmin on Thu, 05/06/2010 - 17:26

Occasionally, we encounter a case which is both ironically entertaining and instructive. (Lockheed Martin Corp. v. L-3 Communications Integrated Systems)

Lockheed is the producer of the popular – in military circles – P3 Orion anti-submarine aircraft. Although the Orion is no longer in production, vast sums are spent annually, by armed forces around the world, to refurbish and upgrade existing aircraft.

In 2005, Lockheed sued L-3 in Atlanta, alleging misappropriation of trade secrets relating to the design and construction of the Orion. Not to be outdone, L-3 sued Lockheed in Dallas, alleging that the Atlanta litigation was brought, by Lockheed, to “stifle competition.”

In May of last year, a jury in Atlanta found in favor of Lockheed, awarding $37.3M in damages, plus “reasonable” legal fees and litigation expenses (Lockheed claimed more than $16M as being “reasonable”). Undaunted, L-3 later claimed that it had “newly discovered evidence” obtained during discovery in the Dallas case. L-3 alleged that Lockheed had improperly withheld this evidence, which was critical to its defense of the Atlanta case.

Specifically, L-3 alleged that Lockheed had knowingly allowed a competitor of L-3, CASA-EADES, to use the subject information without a license. Moreover, an internal memo, also withheld by Lockheed, allegedly would have shown that a “letter of assurance” from CASA, upon which Lockheed had relied at trial to demonstrate the steps it had taken to protect its trade secret, was actually drafted by Lockheed.

After considering this evidence, the Atlanta trial judge ordered a new trial. “Evidence that Lockheed allowed another company to utilize its proprietary data is important because failure to maintain the secrecy of such data results in the termination of trade secret status … the fact that Lockheed, not CASA, drafted the letter is an important fact that L-3 could have presented to the jury in arguing that the steps Lockheed took to protect its trade secrets had been all form and no substance … Therefore, the court concludes that it is more than possible, and is even probable, that the outcome of the jury trial would have been different in this case if Lockheed had properly turned over the documents.”

THE LESSONS TO BE LEARNED: (1) Failure to take appropriate steps to maintain secrecy results in loss of trade secret status; and (2) efforts to improperly withhold documents from discovery sometimes backfire – don’t try it; it’s unethical and often counterproductive.

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