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Emerson Owes BladeRoom $30M in IP Theft Case

by Chris Brook on Thursday May 17, 2018

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A jury ruled that Emerson Electric stole proprietary data center designs from BladeRoom, putting a close to a long running trade secrets lawsuit. The ruling comes a month after Facebook settled with the British manufacturing firm over similar charges.

A California federal jury ruled late last week that Emerson Electric Co., a manufacturing company based in Missouri, unlawfully used intellectual property belonging to BladeRoom Group Ltd., a manufacturing firm based in the United Kingdom, to build a data center for social network giant Facebook.

As a result Emerson is being asked to pay BladeRoom $10 million for lost profit and $20 million as "unjust enrichment." A jury at the United States District Court Northern District of California in San Jose only needed half a day to deliberate before it ruled that Emerson improperly disclosed or used two of four asserted trade secrets to build the center.

Emerson Network Power, the firm that built the center - since renamed Vertiv - reportedly plans to appeal the verdict.

The $200 million data center, in Luleå, Sweden, not far from the Arctic Circle, was completed in March 2013 but the incident that sparked the litigation occurred years before.

It began years ago, in 2011, when BladeRoom Group claims it met with Facebook and Emerson Network Power executives to share its designs and technology under a non-disclosure agreement.

The center, Facebook’s first European farm, is comprised of complex pre-fabricated modules that are manufactured then shipped to the construction site.

Facebook ultimately appointed Emerson Electric to oversee construction of the center in May 2014. It wasn’t long after that date that BladeRoom alleged Emerson, Emerson Network Power, and Facebook stole proprietary data – its pre-fabricated designs for modular “flatpack” racks - to build the data center.

BladeRoom formally sued Facebook in March 2015 over charges its data center design was informed by BladeRoom's IP.

What especially angered the company was the fact that Facebook passed off the design of the racks, servers, storage systems, and other pieces under the guise of the Open Computer Project, a initiative it started to share server and data center designs with the IT space. Ironically the project stipulates that members can only share intellectual property with the owner’s consent, something neither Facebook nor Emerson Network Power did, according to Edward J. Davila, the U.S. District Judge presiding over the case.

BladeRoom specifically called out Facebook according to the court filing for its "breach of the covenant of good faith and fair dealing; its misappropriation of trade secrets; its unjust enrichment at BladeRoom's expense; and its unfair business practices or unfair competition."

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Facebook, for its part, settled with BladeRoom this past April, during court proceedings, for $365 million. The social network had at one point sought a mistrial, arguing that the jurors' perception of the company, which at that point was deep in the throes of the Cambridge Analytica scandal, would be skewed but those efforts ultimately were unsuccessful.

BladeRoom specifically alleged Emerson was guilty of a breach of contract, misappropriation of trade secrets and conspiracy to misappropriate under CUTSA, the California Uniform Trade Secrets Act.

CUTSA quantifies a trade secret as any “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Plaintiffs have to prove one of three things to satisfy a misappropriation of trade secrets under the Act, either proving they owned a trade secret, the defendant acquired, disclosed, or used it via improper means, or the defendant's actions damaged the plaintiff.

According to a January filing (.PDF) BladeRoom "disclosed 13 combination trade secrets, each of which consisted of some permutation of its 25 separately-asserted trade secrets."

During closing arguments last week BladeRoom Group called Emerson a wolf in sheep's clothing, alleging the company faked interest in acquiring the British company to steal its inventions and land the $200 million data center contract. Emerson, conversely, argued its building didn't resemble BladeRoom's proposal.

According to trade publication DataCenter Knowledge Judge Davila said the court determined “based on a preponderance of the evidence that a conspiracy existed between Facebook and Emerson,” adding that Emerson's use of BladeRoom's IP was "willful and malicious."

Emerson improperly disclosed or used two of four asserted trade secrets, according to the jury.

The ruling ends - at least for now - a particularly contentious stretch for all companies involved. Judge Davila had to scold attorneys from both Facebook and BladeRoom for their lack of cooperation at one point before the trial began last month. “I know that litigation is adversarial … I understand that, I respect that. [But] you can’t agree on anything, you can’t agree on the flavor of vanilla ice cream," Judge Davila told the parties, according to DatacenterDynamics, which cited a Law360 post.

Tags: Industry Insights, Manufacturing, IP Protection