Ford hit with $105M verdict over trade secrets

A federal jury in Michigan found Ford Motor Co. guilty of violating a contract and misuse of trade secrets, awarding Texas-based Versata Software $104.65 million on Wednesday after three weeks of trial testimony.

"While we respect the jury’s decision, we believe the facts and the law do not support this outcome. Ford will appeal the verdict," spokeswoman Catherine Hargett told the Detroit Free Press on Thursday.

At issue is a 2004 contract between the two companies involving software Versata developed to manage how vehicle components are configured during assembly.

The jury determined that Ford misused confidential information, reverse-engineered Versata's software for its own commercial use and used it without a license. Law360 first reported the verdict.

The jury awarded $82.26 million for breach of contract and $22.39 million for misuse of trade secrets, according to the jury verdict form reviewed by the Free Press.

'Stabbed in the back'

The verdict signals to companies that theft has consequences, said Dan Webb, attorney for Versata.

"When you have a company, like Versata, that has expended so much effort in developing intellectual property and software for a company to use, that software still belongs to, in this case, Versata. They built the software," said Webb, who is with Winston & Strawn in Chicago. "For Ford to have stolen the software of Versata's just so they could make a competing product and then no longer have to pay license fees to the software owner, that is a serious act of misconduct that we just can't allow to go on.”

Ford hired Versata in the late 1990s to develop software intended to address issues that had led to costly recalls, he said.

"The companies reached a 15-year contract for Ford to use the software in 2004, but Ford ended the agreement in 2014, saying it had developed its own software," Law360 reported. "Webb said he told the jury that Versata later discovered that Ford 'stabbed us in the back,' and that the software it had secretly developed incorporated Versata's trade secrets."

Ford downplays issue

Hargett said the verdict has no impact on current products or activity at Ford.

"The software has not been used since 2014," she told the Free Press. "This was back-end enterprise software last used nearly a decade ago to support vehicle configuration and design and material forecasting. It was never used in vehicles."

Back-end enterprise software is software that companies use to support their business functions rather than putting them in the vehicles, Hargett explained. Examples of other "back-end enterprise software" used by companies would include Microsoft and Salesforce.

'Serious misconduct'

However, Webb told the Free Press that what Ford is saying simply isn't true, that the software is still in use today and that's what inspired jurors to punish Ford with its verdict.

"The automotive software that Ford is using today to keep Ford running and configuring cars has our stolen software in it," Webb said. "That’s why the jury awarded $100 million, to compensate us for the last 7½ years that they've continued to use it — after they have refused to pay any more license fees."

Ford has continued to claim it isn't using the software, Webb said. "That was their defense and they lost the case. So they're going to have to figure out what to do about that."

U.S. District Judge Matthew Leitman in the Eastern District of Michigan presided over the trial.

Winning lawyer also represented Kilpatrick, prosecuted Jussie Smollett

Webb, a former U.S. Attorney for the Northern District of Illinois, was one of former Detroit Mayor Kwame Kilpatrick's criminal defense attorneys. Webb also made international headlines after successfully prosecuting actor Jussie Smollett, known for his portrayal of Jamal Lyon on the Fox hit series "Empire," for a hate crime hoax and lying to police in Chicago. Webb also prosecuted retired Adm. John Poindexter in the Iran-Contra affair.

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Contact Phoebe Wall Howard: 313-618-1034 or phoward@freepress.com. Follow her on Twitter @phoebesaid

This article originally appeared on Detroit Free Press: Ford must pay Versata Software $105M after trade secrets verdict