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Neural Magics Trade Secret Lawsuit Against Facebook

On Behalf of | Dec 28, 2023 | Business

A start-up company founded by an MIT researcher is suing Facebook for making their trade secrets public. Neural Magic is a technology company that sells software that users can install on their CPU to make its performance the same level as graphic processing units. Specifically, the lawsuit alleges that Facebook made proprietary algorithms. The plaintiffs allege that the proprietary algorithms form the heart of Neural Magic’s intellectual property and technology and that by using them at Facebook, the employee shared trade secrets.

The Allegations in the Trade Secret Lawsuit Complaint

The complaint of the lawsuit alleges that Neural Magic’s first employee and technology director breached his non-competition and non-disclosure agreement. The employee signed the agreement when he left the company to begin working for Facebook. The complaint alleges that when the employee accepted the job at Facebook he assured Neural Magic that he would not need to use Neural Magic’s trade secrets.

After the employee began working for Facebook, Facebook announced that they had made an open-source algorithm. This algorithm will enable commodity CPUS to run efficiently using neural networks. The lawsuit alleges that an employee at Facebook publicly thanked Neural Magic’s former employee for cracking a problem with Facebook’s algorithm on the GitHub platform.

Proving Damages in a Trade Secret Lawsuit

Neural Magic alleges that the employee stole the proprietary algorithm which constitutes a trade secret. The company goes on to allege that Facebook has ignored letters sent to the company asking Facebook to take down the GitHub publication regarding the algorithm.

As for damages, the company alleges that making the trade secret public will cause economic damages to the company. By selling proprietary software, the company is set to be able to compete with industry heavyweights. Without the trade secret remaining secret, however, the company will find it more difficult to compete with other industry figures.

Bringing a Trade Secret Lawsuit

No central government agency governs the protection of trade secrets. In most states, you will need to bring a lawsuit for misappropriation or infringement of a trade secret lawsuit to enforce your rights. You will need to bring the lawsuit before the statute of limitations expires. Many state laws regarding trade secrets are based on the Uniform Trade Secrets Act (UTSA).

The UTSA is a model law that addresses the ability to bring lawsuits against people and businesses for exposing trade secrets. The statute of limitations to bring a trade secret lawsuit is three years from the time the plaintiff discovers the misappropriation of the trade secret. Every state changes the model law to some extent, so if you are wondering about the statute of limitations, contact skilled trade secret lawyers as soon as possible.

State Laws Protect Misappropriation of Trade Secrets

Businesses can seek legal remedies for trade secret misappropriation. Trade secret misappropriation includes breaching a confidentiality agreement. Many employees in technology firms sign a confidentiality agreement before they start work. In the lawsuit mentioned above, the employee who left the company had signed a confidentiality agreement.

Breaching a confidentiality agreement would include telling a new employer a trade secret the employee learned or developed while working for a previous employer. In addition to breaching confidentiality agreements, the misappropriation of a trade secret can happen by other means. Discovering a trade secret by improper means is also unlawful. For example, if someone hacked into a company’s database and downloaded secret information about a proprietary product, they would have engaged in misappropriation of trade secrets in addition to committing several different crimes.

What Does the Plaintiff Need to Prove to Win a Trade Secret Lawsuit?

To win a trade secret lawsuit, the owner of the trade secret will need to prove that the shared information qualifies as a trade secret. The trade secret must be something that confers a competitive advantage. In other words, by knowing the trade secret, a company could gain a competitive advantage over other companies or rivals.

The plaintiff must also prove that the defendant acquired the trade secret improperly, or that the defendant improperly disclosed the trade secret. Improper disclosure usually happens when the person disclosing the trade secret or publishing the information had reason to know that they acquired the trade secret improperly. The company Neural Magic would need to prove that Facebook had reason to know that they acquired the algorithm by improper means when they published on GitHub. The following methods constitute improper acquisition:

  • Theft
  • Bribery
  • Espionage
  • Fraud

Remedies for Trade Secret Misappropriation Lawsuits

The purpose of filing a trade secret misappropriation lawsuit is to recover relief from a court. The victim of trade secret misappropriation can seek monetary relief, costs, attorney’s fees, and equitable relief. Monetary relief for trade secret misappropriation includes all of the following:

  • Compensatory damages: The owner of the trade secret can recover monetary damages for any loss of profits that resulted from the trade secret misappropriation.
  • Royalties: The victim of a trade secret misappropriation can seek a reasonable amount of royalties. Royalty payments are essentially payments made by the infringer to the owner for the use of their trade secret during the period of misappropriation.
  • When the defendant acted maliciously or willfully, the defendant might be entitled to punitive damages, which can be millions of dollars.

The plaintiffs may also be entitled to equitable relief, in which the court orders the defendant to do something or to stop doing something. Preliminary injunctions stop the defendant from using the trade secret during the lawsuit. Permanent injunctions are final orders that force the defendant to stop using the trade secret.

Contact Our Trade Secret Law Firm Today

If your business is the victim of trade secret misappropriation, our law firm can help. AtAU LLC, we have extensive experience when it comes to bringing trade secret lawsuits and defending against them. Contact our Chicago trade secret law firm today to schedule your initial consultation.