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By: Nancy M. Reimer and William A. Hadikusumo
A recent decision by the United States Court of Appeals for the Eleventh Circuit in Financial Information Technologies, LLC v. iControl Systems, USA, LLC, — F.4th — (11th Cir. Dec. 22, 2021) provides an all too real example of the oft-used idiom “do as I say, not as I do”.
Financial Information Technologies (“FinTech”) develops and sells software that processes and streamlines electronic payments between alcohol beverage retailers and distributors. FinTech’s proprietary software allows for the turnaround and payment of invoices within 24 hours–something previously unheard of in a highly competitive and highly regulated industry.
iControl, a relative newcomer to the food and beverage payment industry, began to hire FinTech’s former employees to develop and sell a product similar to FinTech’s software. Tempers flared, however, when FinTech’s customers began to flock to iControl, lured not only by alleged improvements to the payment platform but a significantly lower price.
The highly contentious matter went to trial, where the jury found there was misappropriation by iControl and awarded $2.7 million in actual damages and $3 million in exemplary (punitive) damages to FinTech. iControl promptly appealed. Ordinarily, overturning a jury’s liability finding is a difficult task for any defendant, but iControl’s missteps would ultimately doom its appeal.
In its appeal, iControl relied on its defense that the allegedly misappropriated trade secret information did not include protected trade secrets because it was readily ascertainable., iControl, however, allowed a general verdict that did not require the jury to identify which of the seven trade secrets was misappropriated. As a result, the Eleventh Circuit did not need to assess each secret individually to determine whether each one was readily ascertainable. Instead, the Eleventh Circuit could affirm the judgment so long as a reasonable jury could find at least one of FinTech’s trade secrets was not readily ascertainable.
iControl’s appeal would have fared better if they insisted on a special verdict at trial. This requires the jury to specify which of the alleged trade secrets it would find to be readily ascertainable and, thus, not protectable. By allowing a general verdict, iControl’s appeal needed to prevail on each of the seven alleged trade secrets instead of just one or two.
Subsequently, iControl attempted to move for a new trial which the district court promptly denied. iControl then moved for JMOL as to damages rather than liability–a misstep that would, unfortunately, subject the appeal to a stricter standard. iControl now faced the Herculean task of needing to prove that there was an “absolute absence of evidence” of protectable trade secrets as to each of FinTech’s seven alleged trade secrets. iControl would learn that this task was insurmountable.
iControl’s missteps are a cautionary tale for counsel representing similar defendants in trade secret misappropriation trials. First, where there are allegations of misappropriation of multiple trade secrets, defendants are well advised to insist on a special verdict or special interrogatories, which require the jury to specify which trade secrets its verdict is based on. Second, defendants in trade-secret misappropriation trials should take special care to always contest liability (and not just damages) in a motion for JMOL at trial.