IP Law Daily Injunction barring Walmart from future misappropriation of website developer’s trade secrets affirmed
Thursday, February 13, 2020

Injunction barring Walmart from future misappropriation of website developer’s trade secrets affirmed

By Deirdre Kennedy, J.D.

Evidence supported jury’s finding that developer took measures to protect confidentiality of certain Adobe source files, but not other asserted trade secrets, and a damages reduction was warranted for lack of proximate cause.

A permanent injunction granted to a contractor hired by retailer Walmart to develop an interactive e-commerce website was upheld on appeal by the U.S. Court of Appeals in St. Louis. The injunction prevents Walmart from future trade secret misappropriation. Sufficient evidence supported a jury’s finding that Walmart misappropriated certain Adobe source files, but the contractor failed to adequately protect three other asserted trade secrets, so claims over that information failed. The appellate court also upheld the district court’s decision to reduce the jury’s damages award from $12 million to approximately $547,000 due to the contractor’s failure to establish proximate cause beyond the reduced figure (Walmart Inc. v. Cuker Interactive, LLC, February 12, 2020, Erickson, R.).

In 2014, Walmart Inc. and Cuker Interactive, LLC signed a contract under which Walmart agreed to pay Cuker a fixed fee to make the website for Walmart’s "ASDA Groceries business" accessible from desktop computers and mobile devices. Shortly after the project launched, the parties experienced fundamental disagreements over the terms of the contract that ultimately led to protracted litigation. The jury returned a verdict in favor of Cuker on its claims against Walmart for breach of contract, unjust enrichment, and misappropriation of trade secrets. Pursuant to the contract’s limitation-of-liability clause, the district court reduced the amount of damages awarded by the jury and entered judgment in favor of Cuker. After the filing of extensive post-trial motions, the court further reduced the damages awarded to Cuker on the ground that Cuker presented insufficient evidence to demonstrate it undertook reasonable efforts to maintain the secrecy of three of the four alleged trade secrets. The district court found in favor of Cuker on all other issues.

Cuker appealed the district court’s decisions relating to misappropriation of its trade secrets and the reduction in the jury’s award. Walmart cross-appealed the district court’s injunction.

Cuker’s trade secrets.It is undisputed that Cuker never told Walmart that the technologies at issuewere trade secrets. Walmart argued this failure necessarily means that Cuker failedto reasonably protect the secrecy of the trade secrets. Cuker countered that the protective measures it undertook were reasonable under the circumstances. The court concluded that the evidence in the record supported the jury’s finding that Cuker took reasonable efforts to protect only one of the alleged trade secrets, the Adobe Source Files. Because of Cuker’s failure to take reasonable efforts to protect the other alleged trade secrets, the information was not subject to protection, and Walmart was entitled to judgment as a matter of law.

Cuker also challenged the district court’s reduction in damages. However, because the record lacked evidence demonstrating that by obtaining Cuker’s Adobe Source Files, Walmart’s ASDA or Walmart2Go websites were made responsive any more quickly or less expensively than they otherwise would have been, the court could find no error in the district court’s analysis or conclusions on the reduction in damages based on Cuker’s failure to establish proximate cause.

Walmart argued that the contract granted it a perpetual and irrevocable license to use, reproduce, distribute, and authorize others to do any of these things with the Adobe Source Files because the Adobe Source Files constituted "deliverables" subject to licensing under the terms of the contract. The district court interpreted the term "deliverables" as materials that Cuker "authored, developed, conceived, or created for Walmart." At trial, Cuker presented documents and testimony demonstrating that the Adobe Source Files predated its relationship with Walmart.

Therefore, Walmart’s claim was without merit. Because sufficient evidence was presented to support a claim for misappropriation of Cuker’s Adobe Source Files, the court affirmed the district court’s decision, and also affirmed the district court’s reduction in damages based on Cuker’s failure to establish proximate cause for all but $547,090 of the jury’s award.

Breach of contract. Walmart also argued that Cuker’s continued performance and acceptance of contractual benefits waived Walmart’s breach and that there was insufficient evidence that Walmart’s breach excused Cuker’s performance. The court was satisfied, however, that the evidence in the record supported a finding that Walmart’s acts, hindrances, or delays excused Cuker’s performance. Walmart failed to make the second contract payment on time. It also continually demanded that Cuker take on additional tasks and threatened to withhold payment for in-scope work if Cuker did not comply. Walmart’s failure to provide a development environment as required by the contract also impeded Cuker’s ability to complete its contractual responsibilities. Therefore, Walmart was not entitled to judgment as a matter of law on the breach of contract claim.

Unjust enrichment. Walmart further argued that the jury’s finding of unjust enrichment must be reversedbecause (1) unjust enrichment is an equitable remedy that is unavailable if a contractexists, (2) the performance-compelled-under-protest exception does not apply, and (3) there is insufficient evidence that it compelled Cuker to perform or that Cuker protested. The court found, however, that Walmart exploited Cuker’s financial vulnerability by compelling work outside the contract’s scope, and that, therefore, Walmart had been unjustly enriched.

Injunctive relief. Finally,Walmart challenged the district court’s injunction directing Walmart to deleteCuker’s Adobe Source Files from its computers. The court noted that if allowed to keep the Adobe Source Files in its possession, Walmart could use them, or share them, in connection with another project, and found, therefore, that the district court did not abuse its discretion in granting the injunction.

This case is No. 18-1959.

Attorneys: Jess Askew, III (Kutak & Rock) and Elisha B. Barron (Susman & Godfrey) for Walmart Inc. Callie Ann Bjurstrom (Pillsbury & Winthrop) and Kelvin Collado (Faegre & Drinker) for Cuker Interactive, LLC.

Companies: Walmart Inc.; Cuker Interactive, LLC

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