A US District Court has denied the charges brought by Integral Development Corporation against its former chief technology officer (CTO) and co-founder, Viral Tolat.
The FX technology vendor started legal proceedings alleging misappropriation of trade secrets after its initial application for a temporary restraining order to prevent Tolat joining EBS as CTO was rejected.
According to documents submitted to the court, Integral alleged that Tolat had used this knowledge to assist EBS in its development of the EBS Direct platform, which launched in 2012. Integral claims the service is in direct competition to its own products.
“Integral relies on its conclusion that because Tolat downloaded a copy of Integral’s source code while still employed at the company but while engaged in discussions to seek employment with a competitor, Tolat must have used the information he downloaded improperly,” the court says in its final decision.
“Despite Integral’s repeated and increasingly outraged protestations, there is no evidence in the record to support this conclusion.”
New-York based Tolat joined EBS after 19 years with Integral, which he co-founded with chief executive Harpal Sandhu in 1993.
The court found that email correspondence between Tolat and EBS, which Integral had relied on as evidence, related to negotiations about his potential employment and did not disclose any trade secret information.
Integral had claimed damages for the sum of $10 million, but the court found it had not supported this claim with “actual evidence in the record that a drop in its revenue stream was caused by any alleged misappropriation by Tolat”.
It also overturned additional charges of breach of contract, breach of fiduciary duty and breach of duty of loyalty.
Further, it found no evidence of an “established economic relationship between Integral and EBS with the probability of future economic benefit with which Tolat may have intentionally interfered”.
In an emailed statement, a spokesperson for EBS says: "This matter has now been decided by the court in favour of Viral on each and every count of this case. This was always our expectation and we are satisfied by the outcome."
The court granted Tolat’s motion for summary judgement, in which he counterclaims breach of contract. This claim has now been referred for further evaluation and settlement.
Integral's legal representative, Jack Russo, managing partner, Computerlaw Group, says: "We at Computerlaw Group are extremely disappointed in the Court's ruling and we believe it disregards the law and admitted facts (including that Mr. Tolat was downloading what Tolat admitted in his deposition was trade secret source code of Integral to his own separate removable hard drive — without any notification to anyone at Integral — during the same week that he was resigning from Integral and while he had his new employment offer in hand from EBS); we remain confident that the Ninth Circuit Court of Appeal will reverse this summary ruling and require that a full trial on the merits occur in this case."