Leech Tishman

A federal jury in Texas found a former employee of a stock-trading firm and another defendant liable for more than $12 million in damages for misappropriating intellectual property, including trade secrets, to form a rival firm.

Dr. Andriy Kuharsky was formerly a research scientist at Quantlab Technologies Ltd. He claimed that he was terminated by Quantlab “on the pretext of performance issues” and was only paid a portion of the bonuses to which he was entitled.

Emmanuel Mamalakis is an entrepreneur who recruited Kuharsky to form a rival firm called SXP Analytics LLC in 2007.

According the plaintiff’s allegations, Kuharsky and another former Quantlab scientist, Dr. Vitaliy Godlevsky, stole source code developed by Quantlab. They also allegedly enlisted the help of Quantlab software developers to use the code at SXP.

Sleeper Cell

Kuharsky was allegedly involved in a romantic relationship with one of the developers, described in the complaint as a “sleeper mole,” and convinced her to steal copies of Quantlab files on four occasions. After his termination, he also allegedly used the network credentials of a friend and former Quantlab coworker.

Mamalakis asserted that he relied on statements by Kuharsky and Godlevsky that they did not have any Quantlab code.

After Quantlab discovered the theft, it spent at least $36,000 in investigation expenses and also contacted the FBI.

After the FBI declined to prosecute the defendants, Quantlab sued in 2009. In addition to theft of trade secrets, the causes of action included breach of confidentiality agreements (by the former employees) and copyright infringement (for copying the code).

The district court judge previously granted summary judgement that the two defendants were liable for copyright infringement, and that Kuharsky was liable for misappropriation of trade secrets and breach of contract.

Kuharsky was ordered to pay Quantlab $7.2 million and Mamalakis was ordered to pay $5 million.

Earlier this year, four of the six co-defendants in the case, including SXP and Godlevsky, settled for a reported $28.5 million.

The case is Quantlab Technologies Ltd. Et al. v. Godlevsky et al.

Takeaways

  • An employer cannot necessarily rely on representations by new employees that they are not making use of intellectual property belonging to a former employer.
  • Even if law enforcement authorities fail to prosecute for trade secret theft, the owner of the secrets may still succeed in a civil suit.

About Us

The firm’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: “Morris Worm” by Go Card USA from Boston, USA – Museum of Science – Morris Internet Worm. Licensed under CC BY-SA 2.0 via Wikimedia Commons.

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