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Trade Secret Theft Victim Wins $845 Million

by Chris Brook on Tuesday May 7, 2019

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While very little money will change hands, the sum is believed to be one of the largest judgements for the theft of trade secrets in U.S. history.

A Dutch chip manufacturer was awarded $845 million this past weekend stemming from a case which alleged that two former employees stole confidential and proprietary information and trade secrets.

The company, ASML Holding N.V. - which makes photolithography systems for the semiconductor industry, said on Saturday that a U.S. court had entered its final judgement on the case in favor of the company.

In addition to the sum, $845,114,000, the trial court issued an injunction barring XTAL, a company comprised of former ASML employees who breached their contracts with the company to steal ASML data, from doing business in the field for three years.

It's highly unlikely that will ever happen, nor will the money actually be collectable as XTAL is in bankruptcy. Under an arrangement however, ASML will wind up owning the majority of XTAL's intellectual property.

Even if XTAL wasn't bankrupt, the injunction would have put it at square one. It specifies the company can't carry out any software development activities on any of its products that ASML alleges are based on its intellectual property. The injunction also allows ASML to reach out to "actual or potential customers of XTAL and inform them of the jury’s verdict and result of the lawsuit."

The news was almost a forgone conclusion and expected, especially if you've followed the case over the last several years. The final judgement, which was issued last Friday in the Santa Clara County Superior Court, comes nearly six months after the jury's verdict in favor of ASML. In addition to finding that the former ASML employees breached their contracts with the company and the California's Computer Data Access and Fraud Act, the jury found that XTAL's actions were malicious, something which entitled ASML to an award of punitive damages on all counts and attorneys' fees on its Penal Code and trade secret claims.

The case involved two ex-ASML employees who left the company in 2015 to start XTAL. Before the two left they copied data, like source code, programming language scripts, and other intel, from their work machines to external storage devices. At the time ASML didn't think XTAL was going to specialize in computational lithography, the chief business of Brion, a company ASML acquired in 2007.

Ultimately, ASML's tech was a large chunk of XTAL's business and ASML's lawyers were able to prove there had been IP theft after filing court orders to get XTAL to turn over its computers and devices.

Despite being largely stagnant since last year's verdict, the case found itself in the news last month after Het Financieele Dagblad, a Dutch paper, classified the theft as Chinese espionage. While some of the former employees were Chinese nationals, individuals from other nations were also involved, the company stressed. The company also shot down rumors last month that Samsung, which had a partnership with XTAL and was ASML’s largest customer overall, had any involvement with the case.

While the judgement may have been expected, the outcome wasn’t exactly clear cut for ASML over the last couple of months. The final judgement was delayed after XTAL filed for Chapter 11 bankruptcy back in December. This piqued the interest of ASML and stoked fears the legal ordeal could run up charges for XTAL, or that its IP could get auctioned to a third party. XTAL planned to sell its intellectual property as part of bankruptcy, the same IP that ASML demonstrated at trial was replete with ASML trade secrets.

Because of this, in addition to the injunction, both sides brokered language into the agreement guaranteeing the return of hard drives containing source code and patents. That document (.PDF) was filed by M. Elaine Hammond, a U.S. bankruptcy judge, on Friday, the same day the final judgement was entered.

Even though ASML won't actually get the $845 million, the figure is among the highest ever awarded to a victim in a trade secret theft lawsuit. One other case, when Amrock - a title insurance, settlement services, and valuations provider - was ordered to pay HouseCanary - a real estate evaluator - $740 million over allegations its intellectual property, formulas, algorithms, and models were stolen last year, comes close.

Tags:  Data Theft IP theft

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