WASHINGTON – A federal appeals court has ruled that AT&T can still get a fair trial on charges that it stole trade secrets from a Laurel company, even though its attempts to subpoena the federal government in the case were quashed in the interest of national security.
The ruling by a three-judge panel of the 4th U.S. Circuit Court of Appeals upheld the decision by a federal district judge in Maryland, who rejected AT&T’s argument that it could not defend itself without the government’s evidence.
DTM Research, a computer software company, claimed that AT&T stole data- mining and analysis techniques from its “Orca Blue” process during negotiations between the companies in 1995.
AT&T was interested in DTM’s expertise in mining and analyzing large amounts of data to better market its telecommunications products to stay-at-home workers. DTM demonstrated its technology in an AT&T test market in San Diego, after first requiring AT&T workers evaluating Orca Blue to sign confidentiality agreements.
The San Diego test demonstrated the promise of Orca Blue to AT&T, according to court documents. But AT&T ultimately broke off talks, amid concerns about DTM’s asking price of $24 million and fears that sharing data with DTM might breach customer confidentiality.
In June 1996, DTM sued AT&T for $24 million and other relief, claiming the telecommunications giant stole its trade secrets and integrated elements of Orca Blue into its own technology.
Among its defenses, AT&T charged that DTM itself had first stolen the secrets behind Orca Blue from the government and that similar techniques were commonly used in the industry. To develop evidence supporting its claim, the company issued subpoenas to several federal government agencies.
But that defense faltered when the agencies refused to comply with the subpoenas, claiming that “any inquiry into technology of the type described in AT&T’s subpoenas would threaten national security,” according to court documents.
A federal district judge agreed with the government, issuing orders in 1998 and 1999 that halted AT&T’s probe. But the judge said the case could still go forward “without risking disclosure of any materials which have been ruled out-of-bounds.”
AT&T claimed that its inability to subpoena the government “completely prevents AT&T from developing its defenses based on DTM’s lack of ownership, rightful possession, right to exploit, and lack of secrecy pertaining to the alleged trade secrets.”
The district court turned the question over to the appellate court, which upheld the lower court in a Tuesday ruling.
The appeals court panel found that while the protected evidence might be marginally relevant, “it is not central to the question of whether AT&T is liable for trade secret misappropriation, and thus AT&T overstates its importance.”
DTM is pleased with the decision, said its attorney, Ralph S. Tyler.
“We’ve only been looking for one thing here . . . which is to get this case to trial,” Tyler said. “We’ll let the jury decide.”
Tyler said the decision is significant because “the 4th circuit, like the district court, rejected AT&T’s tactic to try and avoid ever answering the allegations in this complaint . . . that AT&T stole DTM’s trade secrets. That is the crux of it.”
AT&T spokesman Jim McGann declined to comment on the ruling except to say his company is optimistic. “We’re confident we’ll prevail in this case,” he said.
He declined to say whether AT&T is still using the data-mining technology, or if it ever did.
Tyler said the ruling should keep defendants in similar cases from sidestepping their day in court when the government cites national security concerns. Had the ruling gone the other way, he said, defendants would have been able to “get out of the case by sending a barrage of subpoenas to the federal government.”
“And when the federal government quashed the subpoenas, the defendant could say, `Hey, the case against me must be dismissed, and I don’t ever have to answer to a judge or a jury,” Tyler said.