Troy-based Altair Engineering owes Newport Beach, Calif.-based MSC Software Corp. $26.1 million for misappropriation of trade secrets and confidentiality agreements, based on a decision in the U.S. District Court for the Eastern District of Michigan.
The jury verdict on Friday concludes a seven-year court case, though Altair may appeal. The case concerns Altair’s software MotionSolve, which used information provided by former employees of MSC, says Pat Hickey of Detroit-based Dykema Gossett, which represented MSC in the lawsuit. “The trade secrets at issue here are what gave MSC’s Adams/Solver (software) its competitive advantage in the marketplace,” he says.
The former MSC employees used confidential source code, formulas, equations, algorithms and other aspects of the software—developed while they were employed by MSC—in helping Altair create a product line that directly competed with MSC. The conduct, it was argued, was in direct violation of MSC’s employment policies prohibiting current and former employees from disclosing confidential or proprietary information to third parties.
Hickey says the $26.1 million judgment is a paid-up royalty, or a paid-up license, that the jury deemed appropriate for using the trade secrets in question.
“When the jury was determining what a reasonable royalty would be, one of the things they had taken into account was (whether or not) MSC would have licensed this product to Altair,” says Jim Hermon, who also sat on the Dykema team along with Tim Kuhn and Kelly Houk. “It’s fairly likely they would not have. You’re not going to give your crown jewel to a direct competitor.
Altair officials say the case isn’t over. In a statement, the company said:
“At Altair, we are proud to have set our industry’s highest standards, both technical and ethical, throughout our 29-year history. While we respect the hard work of the jurors to hear and rule on what is undoubtedly a deeply technical case, we are disappointed and disagree with the verdict. This case is not over, and we are continuing to pursue our legal options. Without exception, Altair remains resolute on innovating and investing in our technology to help our customers compete and succeed.”