On March 18, 2021, a jury in the United States District Court for the Eastern District of Texas rendered a $152 million verdict in favor of plaintiff in a trade secrets trial twice postponed by the COVID-19 pandemic.
In June 2019, Plaintiff ResMan LLC (“ResMan”), a property management software company, filed suit against customer Karya Property Management, LLC (“Karya”) and Karya’s third party software consultant, Scarlet InfoTech d/b/a Expedien, Inc. (“Expedien”), alleging trade secret misappropriation, breach of contract, tortious interference, and violations of the Computer Fraud and Abuse Act and seeking temporary and permanent injunctive relief, damages and attorneys’ fees. Specifically, ResMan alleged that Karya provided Expedien with extensive unauthorized access to ResMan’s proprietary software platform (the “Platform”) to improperly copy the Platform to create a directly competitive software product and to usurp ResMan’s investments in the Platform. ResMan further alleged that Expedien actively encouraged these breaches and willfully and intentionally committed breaches itself.
On November 2, 2020, trial began with jury selection but lasted only a few days before a juror tested positive for COVID-19. Judge Amos L. Mazzant III suspended the trial and asked all jurors to get tested and report the results to the court. After a number of positive tests, the court declared a mistrial, and rescheduled proceedings for January 2021 which were later postponed to March 2021.
In March 2021, the case was ultimately put to the jury, which issued its verdict after deliberating for only two hours and five minutes. The jury found that Karya breached its contractual obligations to ResMan, that Expedien tortiously interfered with ResMan’s contract with Karya, and did so maliciously, and that both defendants misappropriated ResMan’s trade secrets. The $152 million verdict in ResMan’s favor consisted of $32.29 million in compensatory damages and $120 million in punitive damages including $90 million attributable to the trade secrets count.
This is a helpful reminder that trade secrets cases will continue to be tried to potentially big verdicts, especially as courthouses across the country begin to reopen to parties, jurors, and counsel.