Trade Secret Theft Will Cost Accenture $44M

(CN) - Accenture must pay $44.4 million dollars to Wellogix, a former client whom it drove to the edge of financial ruin and cheated of its trade secrets, the 5th Circuit ruled.

Wellogix develops and sells software that allows oil companies to estimate oil well construction costs. Given the high cost of oil exploration, a more accurate estimate may save companies "hundreds of millions of dollars," according to the complaint.

In 2005, Wellogix agreed to integrate its complex-services software with the accounting software of a company called SAP. As part of this deal, Wellogix gave its source code to SAP.

Wellogix also shared its code with Accenture, one of the world's largest consulting firms, to pursue marketing possibilities, including a pilot project with BP. Although at least one BP manager said the pilot was a success, it was canceled for cost reasons.

Without telling Wellogix, however, Accenture and SAP later began working together on software for BP that included Wellogix's technology.

After Wellogix sued for theft of trade secrets, an arbitrator found BP liable for making the information from Wellogix's pilot program available to Accenture and SAP, and the parties settled.

The company's claims against Accenture went to trial, where a jury awarded Wellogix $26.2 million in compensatory damages and $68.2 million in punitive damages. The judge later reduced the punitive award, however, to $18.2 million, the amount Wellogix sought at trial.

A three-judge panel of the 5th Circuit affirmed the verdict and damages awards Wednesday, finding that "Wellogix presented sufficient evidence and testimony to support the jury's finding that Accenture used its trade secrets."

Some of the evidence against Accenture included a document that stated "use Wellogix content," and later said, "better deliver similar or better functionality than Wellogix or we may have a problem," according to the ruling. Additionally, a BP employee encouraged Wellogix to sue Accenture, saying "Accenture was utilizing [Wellogix's] confidential information and building out [its] functionality."

"Had we sat in the jury box, we may have decided otherwise. 'But juries are not bound by what seems inescapable logic to judges,'" Judge Stephen Higginson said, writing for the three-judge panel in New Orleans.

Higginson found the $26.2 million compensatory damages award fair, citing Wellogix's evidence that an Accenture employee believed "BP work alone could generate annual fees ... in excess of $20 million if Accenture controlled Wellogix." In addition, after the theft of Wellogix's software, the company lost its potential customers and went "nearly broke."

He also approved the punitive damages award of $18.2 million.

"Wellogix introduced sufficient evidence and testimony to support the jury's finding that Accenture acted with malice. Wellogix showed: that Accenture stated that it could 'easily replicate[ ]' and '[l]ift' Wellogix technology; that Accenture 'harvest[ed]' Wellogix technology while engaged in confidential partnerships with Wellogix," Higginson wrote.

He also noted: "The punitive award in this case is $8 million less than the compensatory award. Accenture does not identify, nor could we find, a case in which an appellate court vacated or reduced a punitive award that was less than the compensatory award. Given that the reprehensibility guidepost was neutral, we decline to do so in this case." (Italics in original.)

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