What are trade secrets? They are a type of intellectual property. Trade secrets are “secrets”, or confidential company information, that may include formulas, processes, designs, and methods that are used in a business to give it an advantage over competitors, who don’t use them.
After a decade-long legal battle, two ex-employees of a large Houston-based trading firm, Quantlab Technologies, have been charged with taking their previous employer’s trade secrets, which included algorithms and formulas, and using them for their own company.
In 2004, Quantlab hired Ukrainian mathematician, Andriy Kuharsky, and physicist, Vitaliy Godlevsky, to work on the company’s trading strategies. They signed documents stating that they would not disclose any of the company’s mathematical models, algorithms, and formulas. They were fired in 2007 for poor work performance. Quantlab claimed that Kuharsky and Godlevsky “copied large amounts of Quantlab source code and other proprietary information over the internet on at least nine occasions, improperly using a Quantlab’s employee’s network credentials”.
Shortly after, Godlevksy and Emmanuel Mamalakis, a securities lawyer, started their own high-frequency trading firm called SXY Analytics. Kuharsky later joined the company. Quantlab filed a lawsuit in Houston that claimed that Godlevsky and Kuharsky conspired to steal its trade secrets. FBI found evidence that Kuharsky downloaded some of the company’s code, after he left Quantlab.
In 2009, Quantlab filed a new lawsuit in federal court alleging that its trade secrets were stolen and misappropriated. In May 2015, Godlevsky, SXP, and other defendants reached an out-of-court settlement of $28 million to Quantlab!
Kuharsky and Mamalakis took their case to Houston court, and they were ordered to pay $12.2 million to Quantlab! For the misappropriation of trade secrets claim, the jury awarded Quantlab $1.8 million from Kuharsky and $1 million from Mamalakis. For the conspiracy claims, the jury awarded Quantlab $5.4 million from Kuharsky and $4 million from Mamalakis.
This is a huge win for Quantlab!
Written by: Teresa Nguyen
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