Ethics PresentationTopic: Trade Secrets

Case Chosen:TechForward Inc. v. Best Buy Co. Inc.Plaintiff: TechForward Inc.Defendant: Best Buy Co. Inc.Case Premise/Introduction: In 2009, Best Buy and TechForward, engaged in a trial program of TechForwards Guaranteed Buyback Plan in a number of Best Buy Stores. TechForward has done similar deals with other big-name retailers as well.

Basically, customers choose to purchase the plan at the time theyre buying a gadget, similar to the way you purchase an extended time warranty. With the plan, customers also have the option of selling the gadget back to Best Buy for store credit on a sliding scale. The longer they keep the gadget, the less they get back. Its a good deal and avoids the process of having to sell an old gadget for the customer.

TechForwards procedure in evaluating buybacks is uniquethe company took the price, exercise rates, managing cash reserves and more into account to determine how much a gadget is worth. BestBuy allegedly held out the promise of a partnership and got TechForward to give them highly proprietary data under a confidentiality agreement.

After inviting TechForward to its offices, in September 2010, under the pretext of partnering on a nationwide buyback program, Best Buy induced TechForward to share its most confidential, proprietary, and valuable trade secretsinformation that Best Buy needed to develop its ownbuyback program in time for the Super Bowl in February 2011. To gain TechForwards trust, Best Buy assured TechForward that it would abide by its confidentiality obligations and use TechForwards information solely for the purpose of evaluating a potential partnership with TechForward. It also promised to erect a brick wall to segregate employees working with TechForward from those working on Best Buys own buyback program. But Best Buy did not keep any of those promises . Best Buys conduct fell woefully short of basic standards of decency. Six weeks after the exchange of TechForwards proprietary information, Best Buy decided to end the relationship and start a similar program of its own, that of course closely resembled (basically copied) the startups procedures and format.In breach of its contractual obligations, and basic commercial ethics, Best Buy immediately began sharing the information freely within the company. When it became clear that TechForwards information had value and that a national buyback program would throw off tons of cash, Best Buy cast TechForward aside because it did not want to make TechForward rich at its expense. Yet it continued to use TechForwards trade secrets in dozens of internal financial models that helped senior executives at Best Buy evaluate and eventually launch the national buyback program. On top of that, it brazenly passed those trade secrets along to Best Buys insurer to help convince it to underwrite the program. What is more, Best Buy knew that what it was doing was wrong. Indeed, even as it prepared to visit TechForwards offices to extract more information, Best Buy was aware of the potential legal consequences of its actions. Shortly thereafter, Best Buy tried to erase the evidence of its misdeeds by deleting the name TechForward from its fileseven a sit preserved, and continued to use, the trade secrets that formed the crux of the financial models.

Techforwards Response: TechForward Inc., filed a lawsuit in U.S. District Court for the Central District of California, alleging that Best Buy illegally modeled its buyback program after the startup's own Guaranteed Buyback Plan and misappropriated TechForwards trade secrets to do so.

Offenses: Misappropriation of trade secrets, breach of contract, deletion of evidence

Laws applicable: Uniform Trade Secrets Act, Civil Code 3426 et seq

Judgement: On November 16, 2012, after a seven day trial, a nine-person jury found Defendants liable for misappropriation of Tech Forwards trade secrets and breach of contract, and returned a verdict of $22 million in favor of TechForward. The jury also found by clear and convincing evidence that Defendants (collectively referred to as Best Buy) committed willful and malicious misappropriation, a finding that allows the Court to impose exemplary damages of up to $44 million. In reaching this conclusion, the jury determined that Best Buy intended to cause injury and that its conduct was despicable and done with a willful and knowing disregard for the rights of others. The jury also imposed a punitive penalty of $5 million totaling the damages to $27 million.

Conclusion:The major drivers of the judgment were:A) Best Buys Conduct Violated Basic Commercial Ethics.B) Exemplary Damages of No Less Than $22 Million Is Warranted inLight of the Compensatory Damages.C) Best Buys Substantial Net Worth Justifies Exemplary Damages of atLeast $22 MillionFor the reasons stated above, TechForward respectfully requests that the Court award TechForward no less than $22 million in exemplary damages for Best Buys willful and malicious misappropriation.