Consumer electronics Goliath Best Buy Inc. was hit on Thursday by a sizable pebble from the slingshot of David-sized startup software company TechForward, in the form of $27 million in damages for trade secret theft.

TechForward developed software that calculated the buyback value of different electronics, such as computers and televisions. The company claims that after it worked with Best Buy to develop the retailer’s own buyback program, Best Buy walked away and developed the program alone, using TechForward’s technology. As a result, TechForward alleges it had to go out of business.

The argument was pretty convincing to the jury, which awarded TechForward $22 million. The judge added the remaining $5 million in punitive damages.

“We vehemently disagree with the size of the award given the facts of this case, and intend to vigorously challenge this verdict,” said Best Buy spokeswoman Paula Baldwin.

Schiff Hardin Partner and columnist Matthew Prewitt explains the reasoning behind the award amounts. According to Prewitt, TechForward sought only monetary relief, not injunctive relief and “cast its lot solely with the jury,” which, as we can see above, worked out.

The punitive damages award from the judge, on the other hand, is small. The court initially granted Best Buy’s motion to strike TechForward’s claim for punitive damages entirely, only to later find that the Trade Secrets Act preempts the California statute that Best Buy used in its motion.

“However, it appears that the court was still persuaded by defendants that they were right on the facts, even if they were wrong on the law, and that the responsible employees were rogue actors operating without the blessing of senior executives,” Prewitt says. “Defendants may have lost the legal argument, but their motion to strike still paid off by priming the judge to award only very modest punitive damages.”

Read more at the Star Tribune.


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