Facebook Trade Secret Trial Begins First Day

SAN JOSE, Calif. (CN) -On a day where Facebook defended itself in the continued fallout from the Cambridge Analytica scandal, the company quietly launched its defense against accusations of stealing trade secrets to build an advanced data center near the Arctic Circle.

All three parties gave opening statements kicking off a trial that pits a small England-based company specializing in modular construction called Bladeroom Group against two titans of their respective industries — Facebook and Emerson.

“This is a case about arrogance,” said Jeffrey Fisher, attorney for Bladeroom. “These two corporations used their power to trample on the rights of Bladeroom Group.”

The story Fisher unfolded to the jury on Wednesday afternoon detailed how Facebook and Emerson — an international engineering services corporation — conspired together to take Bladeroom’s unique and innovative designs and then instead of paying for these services, stole them and used them to construct a unique data center in Lulea, Sweden.

Bladeroom is seeking a total of $300 million in damages from the two companies.

Both Facebook and Emerson refuted the allegations during their first salvos in what is expected to be a six-week trial.

“We like their product,” said Michael Rhodes, attorney for Facebook. “It is kind of cool, but it wasn’t the right fit for the right market. What you have here is a bit of sour grapes.”

Rhodes and Emerson attorney Rudy Telscher portrayed Bladeroom as a small mom-and-pop operation that was in over its head as it attempted to play with the big boys, got their feelings hurt and are now coming after deep-pocketed corporations in an attempt to sue for more money than it’s ever made in company history.

“Mr. Fisher believes he’s the innovator,” Rhodes said. “Silicon Valley couldn’t figure out something that only this little company in England could.”

The problem that Bladeroom claims it figured out was how to build data centers more efficiently with fewer costs.

Data centers are where technology companies store their information in computer servers, which power not only their given products but the internet in general. In these large data centers, often the size of a football field, the servers, about as thin as a pizza box and twice as long, are stored on approximately 8-foot racks. These server racks are then placed side by side on multiple floor levels running the entire distance of the center.

Most large internet companies with millions of users, like Facebook, Microsoft, Amazon and Google, have several of these large data centers located throughout the globe.

Facebook alone has about 50.

When Facebook went to construct one such data center in Lulea, Sweden in 2011, they were faced with unique problems, such as a condensed construction season due to the far northern latitude and high labor costs.

Bladeroom believed it had a solution and reached out.

Bladeroom CEO Paul Rogers had been a specialist in modular construction his entire career. Modular construction is where all the parts of a given construction project are fabricated and assembled in a factory, then shipped to the site, where all the parts are then put together.

Rogers started a company that built modular kitchens that could temporarily be assembled in schools, hospitals, disaster relief sites and military installations. He moved on to building modular hospital rooms in an effort to cure a backlog of medical visits in the United Kingdom.

He then founded Bladeroom, which focused on data centers.

The common thread was modular construction that focused on efficiency, cost control, suppressing labor costs and keeping things cool. Kitchens and hospitals require advanced air control techniques to function. Similarly, servers must be kept cool as they have a tendency to overheat.

So Bladeroom reached out to Facebook, saying it could help them build a data center in a short summer season while controlling labor costs.

Facebook asked for a proposal, then sent a team of engineers to England to explore Bladeroom’s product.

Meanwhile, Bladeroom had reached out to Emerson to explore whether the company might be willing to enter a partnership, so that the modular construction company could scale up its production.

Emerson also expressed interest, and visited the campus at the same time as Facebook. Bladeroom says this is when the conspiracy was hatched, while Facebook and Emerson say this was a coincidence.

Regardless, Facebook did not give the contract to build the Lulea data center to Bladeroom but instead gave it to Emerson, which ended up building the facility over the course of four years, for a profit of about $18 million.

According to defense counsel, Bladeroom went on its merry way, carving out a niche in the market and growing until Rogers saw a blog post from a Facebook that described the Lulea data center with elements of Bladeroom’s design and using its terminology.

Rogers then suspected the trade secrets it shared with Facebook during the proposal phase had been taken and used by the company.

Emails produced during the discovery phase show Facebook and Emerson talked about aspects of Bladeroom’s modular approach.

Both Facebook and Emerson said talking about the approach was natural and nothing untoward occurred. Instead, they both claim Bladeroom’s modular approach was duly considered and abandoned because it wasn’t going to work.

Furthermore, Facebook claims they didn’t use a modular form of construction for the Lulea facility.

Emerson says they designed the data center to the specifications of Facebook and used engineering techniques it devised in house without the assistance of Bladeroom.

“Emerson got that contract because they earned it,” Teslcher said. “They didn’t get it by cheating, lying or conspiring. We did it by listening to Facebook and coming up with solutions.”

 

Cambridge Analytica

Wednesday was also a busy day for Facebook CEO Mark Zuckerberg.

In a conference call with reporters, he asserted his responsibility to protect user data and said it will always be a difficult proposition, assuring he would comply with Congressional investigations.

Facebook also said the personal information of 87 million users may have been improperly shared with campaign consultants Cambridge Analytica, larger than its initial forecast of 50 million. Cambridge Analytica said they only received data relating to 30 million users and deleted it soon after.

Additionally, on a busy day for the social media giant, it watched another case claiming it improperly used facial recognition technology get tossed out of federal court by a judge who said the plaintiff relied on one photo on which Facebook didn’t employ facial recognition.

Zuckerberg is scheduled to appear before the House Energy and Commerce Committee on April 11 to testify about data privacy and specifically about the Cambridge Analytica situation.

 

 

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