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German Firm Fights to Overturn $4.5M Award in 11th Circuit

An attorney for a German manufacturer accused of stealing a Georgia flooring company's trade secrets asked an 11th Circuit panel Wednesday to reverse a judgment awarding the flooring company $4.5 million in damages.

ATLANTA (CN) — An attorney for a German manufacturer accused of stealing a Georgia flooring company's trade secrets asked an 11th Circuit panel Wednesday to reverse a judgment awarding the flooring company $4.5 million in damages.

AcryliCon USA accused Silikal GmbH of stealing the formula for a proprietary resin used in AcryliCon's industrial flooring systems, relabeling it as its own product and selling it to customers around the world for 15 years without AcryliCon's permission.

In its 2014 amended trademark infringement and trade secrets lawsuit filed in Atlanta federal court, AcryliCon claimed Silikal engaged in the alleged misconduct while it was responsible for manufacturing the resin exclusively for AcryliCon.

The relationship between the two former business associates has a fraught history. AcryliCon previously litigated a federal trademark and trade secrets lawsuit against Silikal in 2008. The legal fight ended in a 2010 global settlement agreement which AcryliCon claims reaffirmed its exclusive rights to the resin and its formula.

Following a May 2017 trial, a jury found in favor of AcryliCon on its trade secrets and breach of contract claims and awarded the company $3 million in compensatory damages.

In August of that year, U.S. District Judge Thomas Thrash entered an order for of judgment in favor of AcryliCon and granting an award of exemplary damages in the amount of $4.5 million.

"The evidence at trial was clear that Silikal deliberately and intentionally sold AcryliCon's trade secret 1061 SW resin for close to 15 years and concealed its misconduct – and that this misconduct continued even after Silikal entered into a settlement agreement with AcryliCon over these same issues in 2010," Thrash wrote.

Although Silikal has admitted in court filings that AcryliCon has rights to the resin product and acknowledged it is contractually obligated to preserve the secrecy of the formula, an attorney representing Silikal argued Wednesday that the contractual relationship between the companies is "not clear."

Attorney Mark Emer of Norton Rose Fulbright told the three-judge 11th Circuit panel Wednesday morning that under the 2010 settlement agreement, AcryliCon is merely an "independent company that has distribution rights" and "does not possess the formula."

"The resin is a trade secret because my client has always known the formula. It was sent [to AcryliCon] as one term of the global settlement agreement," Emery said.

The panel expressed some confusion over Emery's arguments, peppering him with questions about the unclear relationship between the companies.

"There are no contracts I could find in the record that spell out the terms... To me, it's a problem, especially if you're having the formula transferred around... Rights and liabilities evolve from contracts. I don't know where that is here. How would they acquire the trade secret?" U.S. Circuit Judge Gerald Tjoflat asked.

Emery told the panel the formula has "always" been Silikal's trade secret and said the company gave the resin formula to a former principal employee of AcryliCon as part of the settlement agreement.

But according to an attorney arguing on behalf of AcryliCon, Silikal did not prove they developed the formula.

"The uncontradicted trial testimony of [AcryliCon founder and CEO Bjorn Hegstad] is that he developed the resin. He went to Silikal and they acquired the formula. There was an understanding that it was exclusively AcryliCon's resin," attorney Kevin Kaplan of Coffey Burlington told the panel.

"You're telling me there is no trial testimony in the record whatsoever on the Silikal side that they developed the formula?" U.S. Circuit Judge Adalberto Jordan asked.

"None," Kaplan responded.

Emery disputed Kaplan's argument in rebuttal, urging the panel to refer back to the terms of the settlement agreement.

"The global settlement agreement is in evidence. It says [Silikal] was sending the formula to Hegstad. Why would they do that if he developed it?" he said.

"AcryliCon is just a distributor, not a manufacturer. There's no reason for them to know the formula. I don't think the record establishes any claim of AcryliCon ownership," Emery added.

Tjoflat and Jordan were joined on the panel by Senior U.S. District Judge Harvey Schlesinger, sitting by designation from the Middle District of Florida.

The panel did not indicate when it will issue a decision in the case.

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Categories / Appeals, Business, International

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