UPDATE: A New Top 10 Disclosed Trade Secret Settlement

by Orrick - Trade Secrets Group
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http://blogs.orrick.com/trade-secrets-watch/files/2013/10/shutterstock_133884191-200x150.jpgA new trade secrets settlement has shaken up our top 10 disclosed settlements of all time.  Business Logic, a Chicago-based developer of financial software, reports that the investment firm Morningstar, Inc. has agreed to pay it $61 million to settle a trade secrets action.

According to Business Logic’s press release, the company alleged that Morningstar and its subsidiary, Ibbotson Associates, violated a contract and took Business Logic’s intellectual property in a case involving software for managing 401(k) retirement accounts.  (The press release incorrectly claims that Trade Secrets Watch has called this “the largest disclosed trade secrets settlements in Illinois history.”  We have never made such a ranking.). Business Logic’s $61 million settlement is now the #9 biggest disclosed trade secret settlement of all time.

Litigation settlements can often be shrouded in secrecy, and trade secret litigation settlements are no different.  Parties are often sworn to confidentiality, and court dockets are typically silent on the amount of settlements (or even on their existence).  Trade Secrets Watch has tried to pull back the curtain, hunting for the biggest trade secrets settlements we could find.  Although these settlements generally run smaller than the top 10 trade secret verdicts we brought you earlier, they are still quite substantial and confirm that trade secret cases can mean big money:

Rank

Amount

Settlement Payee

Case Name

#1

$1.1 billion (VW agreed to pay $100 million and buy at least $1 billion of auto parts from GM)

General Motors Corp.

General Motors Corp. v. Lopez de Arriortua, 2:96-cv-71038-NGE, E.D. Mich. (Jan. 1997)

#2

$400 million paid by IBM to settle trade secret and antitrust claims (IBM agreed to license $140 million in Compuware software and buy $260 million in Compuware services)

Compuware Corp.

Compuware Corp. v. IBM Corp., 2:02-cv-70906-GCS, E.D. Mich. (Mar. 2005)

#3

$340 million paid by AT&T to settle trade secret, patent and bankruptcy claims relating to the failed “At Home” broadband business

Bondholders’ Liquidating Trust

Multiple actions settled (May 2005)

#4

$290 million paid by Semiconductor Manufacturing International Corp. (SMIC) to settle trade secret, patent and breach of contract claims stemming from the 2005 settlement (see No. 5)

Taiwan Semiconductor Manufacturing Company (TSMC)

Multiple actions in California Superior Court and China settled (November 2009)

#5

$175 million paid by Semiconductor Manufacturing International Corp. (SMIC) to settle trade secret and patent claims

Taiwan Semiconductor Manufacturing Company (TSMC)

Multiple actions in U.S. District Court, California Superior Court, ITC, and Taiwan District Court settled (January 2005)

#6

$75 million paid by Hilton to settle trade secret, fraud, unfair competition, conversion, and multiple other claims

Starwood Hotels

Starwood Hotels & Resorts Worldwide v. Hilton Hotels Corp., 09-cv- 03862, S.D.N.Y. (Dec. 2010)

#7

$75 million paid by A10 in trade secret, patent and copyright action

Brocade Communications Systems

Brocade Communications Sys. Inc. v. A10 Networks Inc., 5:10-cv-03428, N.D. Cal. (Aug. 2012)

#8

$65 million cash paid by Alnylam Pharmaceuticals, plus $10 million promised in milestone payments, plus transfer of 150 patents and patent applications to Tekmira, plus royalty streams in future products

Tekmira Pharmaceuticals Corp.

Tekmira Pharms. Corp. et al. v. Alnylam Pharms. Inc., et al., 11-1010-BLS2, Business Litigation Session of the Massachusetts Superior Court (Nov. 2012)

#9

$61 million paid by Morningstar, Inc.

Business Logic

Business Logic Holdings v. Ibbotson Associates, 2009-CH-46687, Illinois Circuit Court, Cook County Law Division (July 2014)

#10

$44.5 million paid by Grumman Systems Support Corp. in trade secret and copyright action

Data General Corp.

Data General Corp. v. Grumman Data Systems, Inc., 4:93-cv-40087-NMG, D. Mass. (Oct. 1995)

For our research, we tapped our sources, public articles, and public filings with the Securities and Exchange Commission.  We did encounter some challenges given that many of these settlements resolved lawsuits involving multiple different types of claims, in addition to trade secret claims.  Ranking the settlements was also difficult because of complex settlement arrangements, such as Volkswagen’s agreement to buy at least $1 billion in auto parts from GM, when it already reportedly bought hundreds of millions of dollars per year.  Some of the future royalty streams also may ultimately be worth far more than what is indicated on this chart.  With that said, we’re confident that this list represents the best publicly-available information about the Top 10 trade secret settlements on record.

We suspect that there may be other settlements out there that would make this list if litigants or their attorneys were free to talk about them.  Readers, if you are aware of a trade secret settlement that would rank among the top 10 biggest here, and you are not prohibited from sharing, please write to us at tradesecretswatch@orrick.com, including sources and/or citations if possible.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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