Free for a Fee

Trade Secret

July 23, 2015

Paul E. Freehling

At a time when an ex-employee’s newly created company was subject to an injunction prohibiting misappropriation of his former employer’s supposed trade secret, the new company allegedly used that confidential information on a few occasions in the course of providing services.  The former employer sued.  Although the trial court found no violation of the injunction, that ruling was reversed on appeal, and the new company was ordered to pay $1.9 million to the former employer.  Analog Technologies Corp. v. Knutson, Case No. A14-1721 (Minn. App., July 13, 2015) (not for publication).

Summary of the case.  Shortly after leaving the employ of Analog, an electrical engineering company, Knutson formed Dimation, a competitor company.  Dimation allegedly used a trade secret process belonging to Analog for installing and repairing printed circuit boards.  Analog sued for misappropriation and initially was awarded $1.9 million.  The court also enjoined Dimation from using that process for three years.  After filing for bankruptcy, Dimation executed a confession of judgment.  The confession document contained an Early Payment Option (EPO).  Pursuant to the EPO, the judgment would be satisfied if $600,000 was remitted by a specified date, but the EPO would expire if (a) there was a default in payment, or (b) the injunction was violated.  Dimation paid as promised, but Analog rejected the final payment.  It sued Dimation, claiming the EPO was void because the injunction had been violated.  The trial court found no violation.  A few days ago, the Minnesota Court of Appeals reversed and awarded Analog the full $1.9 million judgment less the $600,000 already paid.

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