Identifying Trade Secrets With Precision is Essential to Successful Claims

In November 2020, a small Seattle-based startup Zunum sued industry giant Boeing for trade secret misappropriation, among other things. In May 2024, the case went to trial and a jury awarded a $72 million verdict against Boeing.

After trial, Boeing moved to have the verdict set aside and for a new trial. The Court threw out the jury’s verdict and held that Zunum did not show that the information it claimed Boeing stole and used was eligible for trade secret protection in the first place.

Zunum Sues Boeing for Stealing Trade Secrets

Zunum was founded in 2013 to develop a small, electric commuter aircraft that could travel up to 1,500 miles. In 2017, Boeing’s capital arm invested $5 million in Zunum. In 2018, Boeing invested an additional $4 million. The companies executed a proprietary information agreement under which Boeing agreed to keep Zunum’s information confidential, and also executed investment rights letters governing Boeing’s investments.

By October 2018, Zunum was out of money. Unable to secure additional funding, Zunum furloughed its employees and shut its doors. Zunum blamed its demise on Boeing, stating that it was “forced to halt its development program due to Boeing-caused capital starvation.” Zunum believed that Boeing developed its own hybrid commuter aircraft using Zunum’s trade secrets.

Zunum sued Boeing in Seattle in November 2020, alleging breach of contract, breach of fiduciary duty, and violation of Washington state statutes governing trade secrets, consumer protection, and securities.  Boeing stated that it “wanted Zunum to succeed” but ultimately could not handle the turbulence of Zunum’s mismanagement and “lack of a realistic business plan.” Boeing alleged that Zunum refused to accept help while faltering but was “insisting on a valuation well in excess of $100 million.”  Boeing counterclaimed on the parties’ agreements and sought a declaration of patent inventorship. 

By the time trial started in May 2024, several of Zunum’s claims against Boeing were dismissed and Boeing had prevailed on all of its counterclaims. The only issues for trial were Zunum’s claims for trade secret misappropriation, breach of the Proprietary Information Agreement, breach of the 2017 Investment Rights Letter, and tortious interference with business expectancies concerning two entities.

The Trial and Huge Verdict Against Boeing

At the outset of trial, the court provided the jurors with short descriptions of each of Zunum’s alleged trade secrets which were derived from Zunum’s written interrogatory response. The court carefully instructed that the jurors “should not take the [descriptions] to mean that Zunum possessed the information” or that any of the information necessarily constituted a trade secret.

The jury found that Boeing had willfully misappropriated eleven of Zunum’s nineteen trade secrets and awarded Zunum $72 million – the majority of which was allocated to its trade secret misappropriation claims, with the remainder allocated to its unjust enrichment and tortious interference claims. 

Court Throws Away the Verdict

Following the trial, Boeing renewed its motion for judgment as a matter of law, and the Court granted it in its entirety. The court meticulously combed through the trial testimony and evidence and analyzed the eleven trade secrets that Zunum prevailed on. The court held that Zunum failed to:

• “sufficiently identify each of the alleged trade secrets at trial”; and
• offer more than conclusory testimony that its alleged trade secrets met the statutory definition of a trade secret, that is, it did not “provide evidence that each alleged trade secret derived value from not being generally known or readily ascertainable by proper means by other persons who could obtain economic value from its use”.

The court thus held that the evidence did not support the jury’s verdict with respect to the alleged trade secrets. Zunum’s trade secret misappropriation claim was dismissed with prejudice along with its breach of contract and tortious interference claims. A copy of Judge Robart’s decision can be viewed here.

Takeaways

At all stages of a case, a party claiming it has trade secrets must be able to identify them with specificity.  Courts will not accept vague and amorphous descriptions of alleged trade secrets or their alleged value from not generally being known or readily ascertainable by others. For parties challenging trade secrets misappropriation claims, it is essential to have the trade secrets identified early so a challenge can be mounted well before the expense and time of a trial. 

Hodgson Russ’s intellectual property team helps clients protect their intellectual property rights by prosecuting and defending claims of ownership. Hodgson Russ can also help secure trademarks, copyrights, and other protections for businesses and individuals. For more information, please contact Jodyann Galvin (716-848-1520), Fallon Martin (716-848-1594), or any member of our Intellectual Property Litigation Practice Group.

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