A federal district court in Minnesota ordered a company to pay $1.3 million for using trade secrets that yielded only $8,000 in revenue.

Background

Edward Knutson worked at Analog Technologies Corporation until he resigned in 2004. He went on to start his own company, Dimation.

In 2007, Analog sued Knutson and Dimation for breach of contract, misappropriation of confidential information and trade secrets, breach of fiduciary duty, and tortious interference with contract.

A jury found Knutson and his company liable and entered judgement for about $1.9 million. The court also granted an injunction prohibiting the defendants from making use of the trade secrets.

Dimation filed for bankruptcy and negotiated a settlement with Analog. This settlement permitted Dimation to pay only $600,000 of the $1.9 million.

The settlement agreement stated that it would expire if:

[Dimation] defaults on any payment owed Analog under the Plan or if [Dimation] or . . . Knutson, are found to be or to have been at any time in breach of the State Action Injunction.

Dimation also moved for a new trial, arguing that the injunction was vague, overbroad, and that the district court failed to state the reasons for it.

However, while the settlement was in effect Dimation performed about $8,000 worth of work that the court concluded violated the injunction and thus the settlement agreement.

The court thus reinstated the original $1.9 million judgement.

In other words, the $8,000 cost Dimation $1.3 million.

The case is Analog Technologies Corp. v. Knutson.

Takeaway

Any company that willfully violates a court order is taking a huge risk. Even if the company is seeking to overturn an order, and even if an injunction is later overturned, violating it while it is in effect can be costly, as in this case.

About Us

Leech Tishman’s Intellectual Property Group is based in Pasadena, California with a team of highly-regarded legal professionals with prosecution and litigation expertise in the fields of patent, trademark, copyright, and trade secrets.

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Photo Attribution: “Analog Test Array modular synth by sduck409″ by Stephen Drake – originally posted to Flickr as modsynth. Licensed under CC BY 2.0 via Wikimedia Commons.

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