Texas Verdict Could Be Bellwether For Trade Secrets Litigation

February 2, 2020

 

 

The following article by Committee for Justice director of public policy Ashley Baker was published in Law360:

 

For trade secrets law, 2019 was a formative year for both public knowledge and litigation trends. Due to extensive media coverage of Huawei Technologies Co.’s alleged intellectual property theft and trade secrets disputes between large American companies including Uber Technologies Inc. and Waymo LLC, the public has become more aware of the once-obscure area of intellectual property law.

 

At the same time, trade secrets misappropriation lawsuits are on the rise along with increasingly massive settlements and jury awards. One particular case, Title Source Inc. v. HouseCanary Inc., underscores this trend and the factors that have led to it. It’s an important case to follow, as it could be a bellwether for expansive trade secrets claims and portend what’s to come in trade secrets litigation.

 

Background

 

In March 2018, a Texas state jury returned a more than $700 million judgement in a trade secrets lawsuit brought by HouseCanary, a real estate analytics startup, against Amrock (formerly Title Source), a real estate appraisal and title service company in the 73rd Judicial District Court of Bexar County, Texas.

 

HouseCanary’s claims centered around its automated valuation model technology. AVMs are computer models that learn to estimate property values based on the property’s attributes, comparable properties and other factors.

The two companies entered into an agreement for Amrock to license the mobile app for human appraisers that HouseCanary claimed to be developing. When HouseCanary failed to deliver, Amrock sued for breach of contract. HouseCanary countersued with allegations that Amrock misappropriated its AVM technology and the data used train the models.

 

At trial, Amrock pointed out that its AVM model was built using a publicly available machine learning algorithm and the company’s own data. Moreover, Amrock explained, HouseCanary’s database could not be a trade secret because it consisted of publicly sourced data and semi-public inputs such asmultiple listing services.

 

What began as a $5 million contract dispute morphed into HouseCanary's claiming trade secret violations and convincing a Texas jury to award nearly three-quarters of a billion dollars — one of the largest trade secrets verdicts in American history — despite having no product, no sales and no revenue. The verdict is baffling, and allegations of trade secrets theft are increasingly common. It makes sense to take a closer look at how this could happen...

 

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