With the economy still unsteady after the recession, more and more people are attracted to the idea of starting their own business. But one of the biggest challenges when doing that is making sure you have something unique to offer the market.
For people who have spent most of their career working at one company, that’s often all they know. If they’re going to try to branch off on their own, they’d better make sure their new operation is significantly different from their employer’s, or at least has a new approach to the industry. Either way, it’s important to note that just copying and pasting your employer’s business is not only unethical – it’s illegal.
According to officials, David Newman, a 34-year-old trader who worked in Chicago, stole more than 400,000 electronic files from his employer. Those files contained all of WH Trading LLC’s proprietary computer code and trading software.
WH Trading is an international proprietary securities trading firm that is based in Chicago, but also has offices in New York, Singapore, Frankfurt, and London. The company acts as a market maker and engages in both electronic trading and open outcry of futures contracts, as well as options on exchanges in cities all over the world.
Newman, who left WH Trading to form his own company in early 2014, had spent the previous five months downloading all those trade secrets to multiple USB drives. According to investigators, Newman had fully intended to use the proprietary information at his own trading firm, NTF LLC, which he was aiming to make a direct competitor of his former employer.
According to WH Trading, the stolen information had taken 15 years for a team of statisticians, mathematicians, traders, and software developers to create. Ultimately, the cost of all that devoted time and talent makes their trade secrets worth upwards of $20 million. WH Trading uses it’s proprietary codes to analyze the risk of trades, execute trades, interpret data on the exchange market, and price futures, among other things. All of these are critical tasks for a trading company, and how they make these calculations is what sets them apart from their competition.
Last year Newman pleaded guilty to the charge of stealing trade secrets. The judge in charge of the case, U.S. District Judge Manish S. Shah, just recently declared his sentence of one year and one day in federal prison, a $100,000 fine, and an order against using or disclosing any of the information he stole from WH Trading.
Newman had spent about a decade working for WH Trading before deciding to leave and start his own trading firm. His intention to compete with his former employer is exactly why so many employment contracts currently include non-compete agreements that prevent workers from leaving to work for a competitor – including a competing business they established themselves. An agreement not to poach employees and customers is also usually included. Even if the use of proprietary codes and software was not expressly mentioned in the contract (although it may have been) the laws against such theft should have been enough to deter Newman.Super Lawyers named Illinois business trial attorneys Peter Lubin, Vincent DiTommaso, Patrick Austermuehle and Andrew Murphy Super Lawyers or Rising Stars in the Categories of Class Action, Business Litigation and Consumer Rights Litigation. DiTommaso Lubin Austermuehle’s Illinois business trial lawyers have over a quarter of century of experience in litigating complex class action, copyright, non-compete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes including lawsuits between businesses or between shareholders and owners of the same business. Our Naperville and Wheaton business dispute lawyers handle emergency business law suits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0000 or our toll free number (877) 990-4990. You can also contact us online here.