EMail | Non-Disclosure Agreement Case

E-records Impeach Opponent's E-Discovery

Burst.com’s electronic mail records served the company well in its trade secret lawsuit against Microsoft.  

Wrongful Withholding of Records?

Burst had held conversations with Microsoft in which it confidentially (under non-disclosure agreement) revealed trade secrets (nonpublic ideas of an inventor) about Burst's streaming media technology.  Burst later alleged that Microsoft chose to use these trade secrets without Burst’s consent, and without compensation to Burst.  

So Burst sued, claiming misappropriation of trade secrets and breach of contract.  During the discovery phase of the lawsuit, Microsoft was required to reveal all of its e-mail records on the topic, and Microsoft did turn over a large number of e-mails regarding its development and use of streaming technology. 

But a question arose in court whether Microsoft complied fully with the discovery requirements.  Burst contended that Microsoft had wrongfully withheld some e-records or destroyed them.  To support its contention, Burst produced numerous of its own email records showing particular exchanges between Burst and Microsoft, where Microsoft had produced no corresponding records on its end. Stefanie Olsen, “Microsoft ordered to uncover old e-mails,” September 10, 2003.  

Microsoft's Mismanagement of Records Played to Adversary's Advantage

This mismatch in email records led the court to suspect Microsoft was being evasive.  The court ordered Microsoft to sift through backup tapes in search for missing e-records (looking for electronically stored information (ESI) in network backup is a tedious and expensive process!).  The court's suspicion, coupled with the order to look through backup, cast Microsoft at a strategic disadvantage, and contributed to company’s decision to settle the case and pay Burst $60 million. Tim Siglin, “Microsoft Settles Burst.com Lawsuit,” March 14, 2005.

Had Burst not retained its e-mail records, it would not have had them when needed to pursue this lawsuit in protection of its intellectual property (IP).

--Benjamin Wright

Mr. Wright teaches the law of data security and investigations at the SANS Institute.

Comments

[Ron Coleman]

Oh, I like this post very much. I demonstrates three key points:

1. While most of us would have done the same thing as the Burst.com attorneys once mismatches were found, their diligence is still commendable.

2. Email retention policies are informed by both ends of this situation.

3. Never trust Microsoft.

[Iowabarncat]

When you are playing chums with a juggernaut like Microsoft that has the financial means to put you in the dustbin and leave you to rot, always good to keep a record of any agreements that protect your IP. Certainly Microsoft did themselves no favors by appearing subversive, but Bill can afford that strategy. I think they did a cost based analysis at Redmond and chose the path of least risk not realizing Burst had maintained an ace card. Good advice for all companies with patents or new technologies though, especially when dealing with the big dogs.