Massive Hallmark Trade Secret Award Affirmed

     (CN) – The 8th Circuit upheld a $31 million award for Hallmark against a company that stole its trade secrets and launched a massive cover-up to hide its wrongdoing.
     Hallmark Cards hired Monitor Company Group to compile research for it on the greeting cards market.
     Monitor shared this confidential research with affiliated private equity firm, Monitor Clipper Partners, which it used to purchase a competitor of Hallmark’s, Recycled Paper Greetings.
     Both Monitor and Clipper denied that Clipper had any access to Monitor’s confidential work for Hallmark after the purchase while simultaneously destroying evidence that Monitor sent Clipper four PowerPoint presentations, at its request, that Monitor created for Hallmark.
     Hallmark sued Monitor for breach of contract, and Clipper for misappropriating trade secrets.
     Monitor settled for $16.6 million but the case against Clipper proceeded to trial where a jury awarded Hallmark $21.3 million in compensatory damages and $10 million in punitive damages.
     The St. Louis, Mo.-based 8th Circuit upheld the jury’s awards on Tuesday, finding that the verdict did not give Hallmark an inappropriate second recovery.
     “Hallmark’s settlement with Monitor compensated Hallmark for the transmission of its trade secrets from Monitor to Clipper, while Hallmark’s jury verdict against Clipper compensated Hallmark for Clipper’s subsequent use of those trade secrets to acquire and manage RPG,” Judge Roger Wollman wrote for a three-judge panel. “These two acts caused two distinct injuries, and Hallmark is entitled to compensation for both.”
     Jurors calculated Hallmark’s damages based on unjust enrichment and on a reasonable royalty. Hallmark elected to recover the larger of the two figures.
     “Both of these calculations depend on Clipper’s actual use of Hallmark’s trade secrets: had Clipper merely acquired Hallmark’s trade secrets for its own edification, both of the above damage calculations would have fallen to zero,” the 16-page opinion states.
     In addition, Missouri law allows the award of punitive damages for outrageous conduct caused by “evil motive or reckless indifference to the rights of others.”
     “The record discloses Clipper’s numerous attempts to conceal its misappropriation of the Hallmark’s trade secrets,” Wollman said. “Clipper ignored numerous litigation holds, destroyed records, erased computers, and generally sought to avoid liability for its wrongdoing in whatever way it could. This massive cover-up demonstrates, at the very least, that Clipper acted in reckless disregard of the rights of Hallmark, which suffices under Missouri law to support an award of punitive damages.”

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