Ethics Presentation

Topic: 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 Million
For 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.