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Bethesda software firm may seek trade secrets damages, 4th Circuit says

A federal appeals court Wednesday revived a Bethesda-based software company’s bid to receive compensation from a former product development director who misappropriated trade secrets and breached his employment contract by retaining documents after leaving the firm.

In its published decision, the 4th Circuit said the U.S. District Court in Greenbelt must calculate any damages Diego de Amezaga owes for having breached his contract with AirFacts Inc., which develops and licenses revenue accounting software for the airline industry.

The district court must also determine how much money, if any, Amezaga owes AirFacts for lost royalty revenue when he shared company information with his new employer, a travel agency, in violation of the Maryland Uniform Trade Secrets Act, the 4th Circuit said in its 3-0 ruling.

The litigation, which has bounced twice between the district and appellate courts, concerns AirFacts’ claim for damages after Amezaga breached his contract by keeping on his personal computer details of the “proration” software he developed for the company to help airlines receive their appropriate share of multi-airline ticket sales.

AirFacts also seeks royalties-related compensation for Amezaga having shared with his new employer, New York-based Fareportal, flowcharts he had created detailing AirFacts’ ticket price rules and processing information.

The 4th Circuit, in its decision, reversed Senior U.S. District Judge Deborah K. Chasanow’s ruling that Amezaga’s retention of AirFacts’ proration documents did not breach his employment contract. Chasanow held that Amezaga was an authorized employee when he uploaded them and kept them on his computer solely to refresh his memory if his former supervisors had any questions after he left in 2015.

The appeals court also overturned Chasanow’s decision that AirFacts was not entitled to royalties damages because Amezaga had not put the trade secret — the company’s ticket price rules and processing information – to “commercial use.”  Rather, Amezaga had put the flowcharts that contained the information to personal use as a work sample on his job application, Chasanow ruled.

The 4th Circuit, however, said Amezaga breached the contract not by uploading the proration documents but by retaining them after he left the company.

“(T)here’s nothing in the employment agreement suggesting Amezaga had a right to retain confidential information he created,” Judge Albert Diaz wrote for the 4th Circuit. “In fact, it says the opposite.”

Amezaga’s claim that he kept the documents solely to assist in answering questions if asked by his former company is “of no moment because no one at AirFacts asked Amezaga to keep confidential information on his personal computer,” Diaz wrote.

In addition, a defendant’s commercial use of a trade secret is not a prerequisite to a company’s right to collect for loss of royalties, the 4th Circuit said in sending the case back to district court.

In calculating the royalties owed, the district court should consider the price that licensees might have paid for the information and the value of the information to AirFacts, including its costs in developing the data and the information’s importance to company operations, the 4th Circuit said.

Diaz was joined in the opinion by Judge G. Steven Agee and Senior Judge Henry F. Floyd.

AirFacts’ attorney, Nicholas H. Hantzes, said the 4th Circuit “made an important, correct decision” in permitting the company to seek compensation for Amezaga’s breach of contract and violation of the Maryland Uniform Trade Secrets Act.

“We have alleged damages and we are going to proceed forward … and seek redress,” added Hantzes, of Hantzes & Associates PC in McLean, Virginia.

Amezaga’s attorney, Jerry R. Goldstein, stated via email that “I really don’t have any comments” on the 4th Circuit’s ruling. “The district court judge will have to issue her third decision in the case.”

Goldstein is with Jerry R. Goldstein PC in Rockville.

The federal courts had jurisdiction in the case based on the diversity of citizenship between AirFacts, a Maryland company, and Amezaga, a Virginia resident, and an amount in controversy exceeding $75,000.

The 4th Circuit rendered its decision in AirFacts Inc. v. Diego de Amezaga, No. 20-2344.