Western Digital Hit with $630 Million Award in Trade Secrets Case

Ah, arbitration! That panacea that will cure all ills associated with our country’s out-of-control litigation system, especially those irrational juries who will do just about anything.

Yes, arbitration is just perfect. Except when it isn’t.

Just ask Western Digital. Corporate Counsel has an interesting article about a $630 million award against it and in favor of competitor hard-drive maker Seagate Technology.

According to the report, the matter arises out of a:

four-year battle stemming from accusations by Seagate that a former employee misappropriated trade secrets when he decamped to Western Digital. Western Digital hired Sinig Mao, a Seagate engineer, in September 2006. Seagate sued a month later, alleging that Mao would inevitably share Seagate's trade secrets with his new employer.

The arbitrator apparently found that Mao fabricated evidence and, despite the fact that Seagate could not prove some of its trade secrets claims, issued the massive award.

It’s after awards, especially, that arbitration suddenly doesn’t look so great.

If a jury goes off the rails, first the trial judge and later an appellate court will give the case a good hard look. Not so with arbitrators where reviewing courts, by law, are extremely limited in the post-award relief that they can grant. For example, errors by arbitrators are rarely grounds for vacating an award.

And so parties that pushed cases into arbitration are often left wondering why they ever did.

We’ll try to report on what happens in this case going forward, but given the track record, don’t expect the award to be vacated.