Theft of Trade Secrets Results in $14M Judgment

trade secret graphic

A California jury has found Vade Secure and its Chief Technology Officer Olivier Lemarie guilty of stealing trade secrets from competitor Proofpoint, awarding $14 million in damages against the French company.

France-based Vade Secure was found guilty of infringing upon at least one of Proofpoint’s copyrights and unlawfully using most of the trade secrets flagged by Sunnyvale, Calif.-based Proofpoint. Lemarie, who was a Vice President at Cloudmark from 2010 to 2016, was accused of sharing trade secrets with Vade Secure after being brought on at the company in 2017.

Proofpoint acquired Cloudmark in 2017 for $110 million.

Theft of Source Code and Misappropriation of Trade Secrets “Unacceptable”

“While we welcome fair competition and collaboration within the cybersecurity community, the misappropriation, copying and theft of our intellectual property required us to vigorously enforce our rights,” Proofpoint Chairman and CEO Gary Steele said in a statement. “We appreciate the jury sending a strong message that the theft of source code and misappropriation of trade secrets is unacceptable.”

Of the 20 trade secrets Proofpoint accused Lemarie and Vade of misappropriating, the California-based jury found that Vade’s improper use of the trade secrets was “willful and malicious” in 15 of those instances. This finding allowed U.S. District Court Judge Maxine Chesney to increase the amount of Proofpoint’s award.

The 19-page verdict awards Proofpoint $13.5 million for unjust enrichment and $480,000 for breach of contract.

Proofpoint indicated that Judge Chesney’s decision on punitive damages is expected later this fall.

Lemarie was also found guilty of breaching his employment agreement with Cloudmark. The jury, however, didn’t find that Lemarie’s misuse of the trade secrets was willful and malicious.

Vade Secure didn’t immediately comment on the decision but told The Register it would be evaluating its next steps in the next few days.

“While we were hopeful we would be successful on all claims, we are pleased that the jury saw that Proofpoint and Cloudmark’s claims were an overreach as evidenced by their decision on damages,” Vade told The Register in a statement. “As a core whose core values are integrity and innovation, we don’t believe this outcome accurately reflects who we are.”

Proofpoint said it will also ask the court for injunctive relief to address ongoing and future harm by Vade and Lemarie to Proofpoint.

“Since filing the lawsuit in July 2019, Proofpoint has uncovered evidence confirming that Mr. Lemarie … took and used Cloudmark’s confidential and proprietary information and source code when he joined Vade Secure as Chief Technology Officer in 2017, including by literally copying Cloudmark source code into Vade Secure’s code,” Proofpoint wrote in an April 2021 blog update.

According to Proofpoint’s complaint from July 2019, Vade’s new email security product was a major factor in the company’s ability to secure nearly $80 million of funding from investor General Catalyst just a month earlier. The Series A funding from the venture capital firm in June 2019 represents nearly 90% of Vade’s total funding to date, according to Proofpoint.

“Vade has been developing an MTA (Message or Mail Transfer Agent) product that it intends to launch by the end of this year (2019) and, as explained by Lemarie himself, is intended to displace Cloudmark’s MTA by offering a similarly flexible, cloud-based MTA,” Proofpoint alleged in its 26-page complaint.

Proofpoint Suing Another Tech Company

Proofpoint is also suing Abnormal Security, claiming that ex-Director of National Partner Sales Samuel Boone shared with sales leaders and engineers a ‘battlecard’ that detailed Proofpoint’s strategies for competing against Abnormal’s sales tactics.

Boone started in a few months ago as Abnormal’s director of channels and refuted the claims made by Proofpoint in a response filed in early August.

“Proofpoint was never interested in a practical, good faith resolution of a dispute over documents Boone took with him from Proofpoint,” Boone’s lawyer Thomas Nesbitt wrote in a 73-page response. “Rather, Proofpoint was apparently interested only in punishing Abnormal and coercing Abnormal into not hiring any of Proofpoint’s approximately 3,800 at-will employees.”

Takeaway

Trade secrets are confidential information that provide a business with an advantage over its competitors. The theft or unauthorized use of a company’s trade secrets and customer information by former employees is a growing problem. California businesses should make certain their trade secrets are protected, by both legally binding agreements and other means, and act swiftly if a former employee has stolen their confidential information.  If you would like to speak to one of Eanet, PC’s attorneys about how to protect your trade secrets, please contact us online

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