Wednesday, August 25, 2010, 8/25/2010 08:28:00 AM

The Human Side of A Trade Secret Misappropriation Allegation

By Todd

Today we link you to the interesting story in today's New York Observer about Nicholas S.G. Stern, the 42-year old son of the renowned architect and Dean of the Yale School of Architecture, A.M. Stern. This is a trade secrets blog, you note?

Well, seems young Mr. Stern was formerly an executive vice president at Taconic Builders and this year, on March 3rd, he resigned. And a good number of other employees resigned, too. Taconic accused them of a number of bad things, including misappropriating Taconic's trade secrets. We thought this well-written piece's take on the whole thing was interesting, and have copied the pertinent excerpt below:

Taconic responded swiftly. Reeling from what it perceived as an effort "to take over existing Taconic projects," the company filed a lawsuit, accusing Stern et al. of a "calculated surreptitious effort" to sabotage Taconic's business, in alleged violation of noncompete agreements that it said the defendants had signed. The former employees walked out with "trade secrets," Taconic said, after they allegedly deleted emails from Taconic computers and stole valuable clients. Taconic sought restraining orders on the defendants' construction projects, in an attempt to shut down the lead defector and his crew. "Let's say we got divorced and I got the kids," Mr. Stern said, referring to his colleagues. "I guess that makes me Dad or something."

For the previous two months, Mr. Stern had spent nights and weekends setting up a new company that would become Stern Projects. After resigning, all the former employees immediately began work at Mr. Stern's new company. ("They wanted to go camping with me," Mr. Stern said, continuing the divorce analogy.) To Taconic, it looked like a massive suicide pact—some sort of conspiracy. But Mr. Stern denied that there was any such pact. He said he had only mentioned the new company to his close friends Mr. Carey and John Huthwaite. Mr. Stern called the two men "my right and left hand."

"When Nick came to me a few months prior to his departure and said he was leaving to start his own company, I think he got about four words out before I said, 'I'm going with you no matter what,'" Mr. Carey said. "I don't want to say I follow the guy anywhere, but when it comes to business, I needed to follow him."

The group that resigned, Mr. Huthwaite said, was "essentially a company within the company"—not officially, but that's how they behaved.

Mr. Stern said Taconic's lawyer, Richard Menaker, seized innocuous details and turned them into exaggerated allegations. Taconic has a videotape of Mr. Stern packing up "eight years of memorabilia and personal furniture" from his corner office, which Mr. Stern said was the basis of Taconic's claim that he stole, as he called it, "the secret sauce." Mr. Carey and Mr. Stern said that "trade secrets," as the lawsuit calls them, don't exist in construction, since every project is unique.

"We're not coming up with the formula for Coca-Cola here," Mr. Stern said. "Do you know what the trade secret is in construction? Be honest."

On June 17, the parties settled. "I don't have time, money or the interest in sidelining the business [Stern Projects] to get into a year and a half of appeals to prove that they are wrong on every count," Mr. Stern said.

He wouldn't disclose how expensive the lawsuit ended up being, saying only that it was "more than our drinks tab here." The drinks were water.


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