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Best Buy hit with $27 million in damages for stealing trade secrets

Updated Dec 7th, 2012 12:52PM EST
Best Buy TechForward Ruling

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A jury in California has determined that Best Buy (BBY) must pay $22 million in damages for improper use of another company’s trade secrets, and another $5 million in punitive damages. In a lawsuit filed by start-up TechForward in the United States District Court for the Central District of California last year, the company alleged that Best Buy and two of its subsidiaries misappropriated its trade secrets relating to the Guaranteed Buyback Program, which allows customers to pay for the right to exchange products for store credit to be used on future purchases at a set price. A jury decided on Wednesday that Best Buy is guilty of making illegal use of TechForward’s trade secrets after working for months with the company and then deciding to cancel the deal and implement its own buyback program.

“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 co-founders Jade Van Doren and Marc Lebovitz said in a statement.

TechForward’s full press release follows below.

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.

Zach Epstein
Zach Epstein Executive Editor

Zach Epstein has been the Executive Editor at BGR for more than 10 years. He manages BGR’s editorial team and ensures that best practices are adhered to. He also oversees the Ecommerce team and directs the daily flow of all content. Zach first joined BGR in 2007 as a Staff Writer covering business, technology, and entertainment.

His work has been quoted by countless top news organizations, and he was recently named one of the world's top 10 “power mobile influencers” by Forbes. Prior to BGR, Zach worked as an executive in marketing and business development with two private telcos.