Best Buy Ordered To Pay $27 Million After Stealing Trade Secrets

Best Buy has been ordered to pay $22 million in damages and $5 million in punitive damages for improper use of trade secrets owned by start-up TechForward. The award was issued by the United States District Court for the Central District of California.

In the lawsuit, TechForward alleged that Best Buy and two of its subsidiaries used trade secrets in relation to its Guaranteed Buyback Program. The program allows customers to pay for the right to exchange products in the future for a set price. Customers can also choose to set pricing for in-store credit.

A jury found that Best Buy’s decision to work for months with TechForward before cancelling their partnership and moving forward on its own was tantamount to trade secret theft.

TechForward co-founders Jade Van Doren and Marc Lebovitz said in a statement:

“We are extremely pleased that the jury recognized Best Buy’s misconduct, and we hope this verdict puts large companies on notice that there are real consequences to illegally exploiting start-up businesses like ours.”

Follow the $27 million verdict, TechForward wrote:

TechForward Awarded $27 Million in Lawsuit Against Best Buy

LOS ANGELES, Dec. 5, 2012 /PRNewswire/ – A California jury has awarded TechForward $22 million in damages for the improper use of TechForward’s trade secrets by Best Buy Co., Inc. and two of its subsidiaries relating to TechForward’s Guaranteed Buyback Program. The jury determined that Best Buy’s conduct was willful and malicious. The court also awarded TechForward an additional $5 million in punitive damages.

Reacting to the jury award, TechForward’s co-founders Jade Van Doren and Marc Lebovitz said in a statement, “We are extremely pleased that the jury recognized Best Buy’s misconduct, and we hope this verdict puts large companies on notice that there are real consequences to illegally exploiting start-up businesses like ours.”

TechForward, a small, California-based start-up company, filed its lawsuit, TechForward, Inc. v. Best Buy Co., Inc., et al. in the United States District Court for the Central District of California in 2011, claiming that Best Buy misappropriated TechForward’s trade secrets relating to TechForward’s Guaranteed Buyback Program. The Guaranteed Buyback Program had been implemented with other national consumer electronics retailers around the country.

Under the Guaranteed Buyback Program, the consumer electronic retailer’s customers pay for the right to redeem newly purchased electronic devices at a future date in exchange for store credit that represents a percentage of the original purchase price that can be used toward the purchase of another device from the retailer.

TechForward claimed that Best Buy, after months of working with TechForward to implement the program in Best Buy stores, misappropriated TechForward’s trade secrets and launched its own buyback program without TechForward. Best Buy announced the launch of its program in February 2011 with great fanfare with a Super Bowl commercial featuring Justin Bieber and Ozzy Osbourne.

Jade Van Doren and Marc Lebovitz founded TechForward in 2006. Major investors included leading venture capital firms New Enterprise Associates and First Round Capital. TechForward was sold to SquareTrade Inc., in April 2012. The original TechForward investors retained the right to pursue the lawsuit against Best Buy.

Best buy lost $13 million in Q3, and now it can add more than double that amount in lawsuit losses.

Are you surprised by the jury’s $27 million verdict?