After a trial that lasted more than three months, the eight-person jury empaneled by the Chicago-based court took only two and a half hours to deliberate, siding with Motorola and awarding them everything their attorneys had asked for in damages. The verdict came out to a shocking $764.6 million, or just under $350 million in compensatory damages, representing all of Hytera’s worldwide profits from selling the radios, and over $400 million in punitive damages, designed to deter trade secret misappropriation in the future. The verdict was one of the largest awarded under the relatively new Defend Trade Secrets Act, signed into law by President Obama in 2016. One particular aspect of the decision may prove very significant for employers striving to protect their confidential information.
The Defend Trade Secrets Act was passed by Congress with overwhelming bipartisan support. The intent behind the Act was to provide uniform federal protections for companies’ confidential information. The Defend Trade Secrets Act directly adopts much of its language from the Uniform Trade Secrets Act, a model statute adopted in some form by most states including Louisiana and Texas. While it is clear that the Defend Trade Secrets Act was designed to protect confidential information and contemplated businesses whose dealings occur across state lines, no federal courts had yet given a detailed look at whether companies can sue competitors and be awarded damages for misappropriation of trade secrets that occur outside the United States.
Before the Motorola and Hytera jury began deliberations, Judge Charles R. Norgle who presided over the case had to answer that exact question. The engineers Motorola accused of stealing its trade secrets were all based in Motorola’s Malaysia offices. Since Motorola sued in the Untied States seeking worldwide damages, Hytera filed a Motion to exclude damages other than U.S.-based profits from the jury’s damages calculation.
In beginning his discussion of the issue, Judge Norgle noted that most federal civil statutes are not extraterritorial in their reach, that is, they don’t extend to allow damages for actions that occur outside of the United States. However, Judge Norgle reasoned that Congress clearly intended the language of the Defend Trade Secrets Act to allow lawsuits against companies who have stolen trade secrets in a foreign jurisdiction.
Given a verdict of this size, Hytera will likely appeal Judge Norgle’s decision to allow damages from outside of the country and other aspects of the judgment in the case, so ultimately the United States Court of Appeals for the Seventh Circuit may have to rule on the issue. However, the district court’s reasoning seems sound and extraterritorial application of the Defend Trade Secrets Act is likely here to stay.
This ruling and others like it that have come before and are likely to follow is extremely important for companies who seek to protect their confidential information beyond the borders of the United States. If your company does business in a foreign jurisdiction, particularly one that does not have the robust intellectual property protections of the United States, the Defend Trade Secrets Act may provide you a remedy in the event of foreign trade secret theft. Likewise, it is important to ensure that your company has strong policies in place against trade secret theft among your own employees, as well as onboarding requirements designed to prevent theft of confidential information from competitors. Even if your company is doing business in jurisdictions without significant trade secret protections, this ruling may open it up to liability here in the United States.
One should be aware that regardless of industry, trade secret theft is a serious problem with monumental financial implications for the victim and the thief.
