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Babcock & Wilcox Babcock & Wilcox lawsuit targets trade secrets

Firm claims former employee violated contract, harmed bid to manage two nuclear sites

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Posted: Sunday, May 5, 2013 3:30 am | Updated: 10:06 am, Wed May 8, 2013.

As a high-stakes contract dispute involving Babcock & Wilcox over management of two key nuclear weapons facilities plays out on a national scale, court documents from a related lawsuit in Lynchburg give an unusual inside look into the secret and competitive world of nuclear security and intellectual property.

B&W filed the suit last August, claiming a former employee in Lynchburg violated his contract, his fiduciary duties to his employer and the Virginia Trade Secrets Act when he left the company and accepted a position with a competitor.

The employee, named in court papers as Daniel Glenn of Bedford County, previously had served as site manager for one of the nuclear weapons facilities before coming to work for the B&W Technical Services Group in Lynchburg in 2001 in an unrelated position connected to medical isotopes research. He left the company in March 2012 for a job with a firm competing with B&W for a $22 billion government contract to manage both nuclear sites.

In its original complaint, B&W says Glenn was aware of the company’s bid preparations and may have aided the competing company in its preparation. Additionally, the company specifically cites the time between Glenn’s March 2 acceptance of a job offer from Lockheed Martin and his March 13 e-mailing of his two weeks’ notice of resignation from B&W as a violation of the conflict of interest form he signed at the start of his employment.

The company also says Glenn violated the Virginia Trade Secrets act by holding on to several thumb drives full of company-owned intellectual property — almost all of which is connected to the medical isotopes program — after he was no longer a B&W employee.

Glenn’s defection caused “irreparable harm” to B&W, the company said in the complaint, causing it to lose valuable proprietary isotope research and technology and also damaging its bid to manage the two nuclear sites — the Pantex nuclear facility in Amarillo, Texas, where Glenn had worked as a site manager; and the Y-12 National Security Complex near Oak Ridge, Tenn.

“As a direct and proximate result of Glenn’s breaches of said fiduciary duties, B&W… has suffered significant monetary losses,” the complaint says, referring to both the lost trade secrets and the damage to the company’s Pantex/Y-12 bid. “The exact amount of said losses … have not been fully calculated, but may amount to millions of dollars.”

Glenn’s attorneys declined to comment on the lawsuit last week. In court papers, Glenn and his attorneys say Glenn never signed a non-compete contract with B&W, and the agreement the company is trying to use to prevent him from working for a competitor cannot be used that way.

Further, the documents say that his employment with B&W and any information he had in his possession was focused on medical isotopes and he had little to no knowledge of or involvement in the company’s bid plans. The only Pantex/Y-12-related document he had when he left the company was a single Powerpoint presentation he put together based on his experiences as a manager at Pantex, Glenn’s filings say.

Consolidated Nuclear Securities — the Bechtel-Lockheed Martin partnership that Glenn joined — was named the winner of the National Nuclear Security Agency’s multi-billion dollar contract in early January. B&W filed a protest over that decision; last week, the Government Accounting Office upheld part of the challenge and ordered NNSA to review the bids.

The GAO upheld the part of the protest focusing on NNSA’s evaluation of promised cost savings, Ralph White, GAO managing associate general counsel for procurement law, said in a statement the day of the decisions. Other claims were raised by both B&W’s team and another bidder, White said, but those claims were dismissed.

The full protest has not yet been released to the public, but should be in a few weeks, after the companies have had a chance to remove proprietary information.

Jason Bohne, a spokesman for Bechtel and CNS, said in a statement the lawsuit filed in Lynchburg is between B&W and Glenn, and although the company is monitoring its progress, it is not a party.

“We never requested or received information from Mr. Glenn about B&W or its proposal for the Y-12/Pantex bid, and Mr. Glenn never offered any such information,” Bohne said. “The lawsuit has no relevance to the Y-12/Pantex contract award.

B&W spokeswoman Aimee Mills, while declining to discuss specifics of the Glenn case, said that filing the lawsuit was an unusual move for the company.

“It is not common for B&W to be involved in a case like this,” she said. “However, we are committed to protecting proprietary information. We take this issue very seriously and will not hesitate to pursue legal action when appropriate.”

The News & Advance reviewed the company’s original August complaint, plus responses from Glenn and several related filings totaling more than 200 pages. In them, B&W pursues two separate but related issues: The company argues that Glenn violated his contract by going to work for a competitor while still employed by B&W, and when he did leave, he took with him thousands of proprietary documents filled with company trade secrets.

In its initial filing, B&W requested monetary damages, injunctions preventing Glenn from sharing any proprietary information and prohibiting any future employment or “commercial use…related to…or in any way exploiting” knowledge he had of the isotope program and B&W’s Pantex/Y-12 bid plans.

Todd Sloan, a California attorney who teaches a class on trade secret law at UVa’s law school, said intellectual property cases involving trade secrets — like this one — are “one of the most active areas in the law right now.”

Labeling proprietary information a “trade secret” helps companies avoid the public disclosure required for a patent application, and the information can, theoretically, be kept secret forever.

Companies with a lot of valuable private information often aggressively work to keep that information private, Sloan said, and make sure employees who violate confidentiality agreements are punished to establish the right precedent.

“If one [employee] takes it and gets away, the other’s going to think it’s going to have a license to do it also,” said Sloan.

Recent trade secret cases have resulted in several million-dollar judgments, decades-long injunctions and, in some cases, prison time, Sloan said.

Even if a company has given up on a program or a formula, it still controls the related information if it’s a trade secret, Sloan said. Companies can sell trade secrets to another business, or come back to the project at a later date.

“Even if they might not use it right now, they may choose to use it some time in the future … or incorporate some of it,” Sloan said. “It still remains protected.”

William Evan Reynolds, the former head of B&W’s medical isotopes program and a current B&W official, testified at a January hearing in Lynchburg that the total value of the isotopes program, if sold, would be between $150 and $175 million, according to a 100-page court transcript of the hearing reviewed by The News & Advance.

Reynolds said the information Glenn had on his drives about the isotope project included conceptual design documents, files on experimental work done in Argentina and a financial breakdown of the project, which could, theoretically, provide a “roadmap” to duplicate the work B&W has done.

Reynolds said B&W has spent about $25 million developing the project, which was aiming to produce molybdenum 99, a radioactive material used in more than 70 million medical imaging tests yearly in the United State s. Although the program has been significantly cut, Reynolds said, it is still alive at B&W.

After the hearing, Judge Mosby Perrow issued a temporary injunction against Glenn.

The injunction orders Glenn to immediately stop using any trade secrets he had unlawfully taken from the company, to return any files he still has and to provide monthly certifications to the company that he is not sharing any information owned by B&W, among other stipulations.

Testimony at the hearing began with an apology from Glenn to the court and to both his own attorneys and B&W’s.

Since leaving B&W in March 2012, Glenn repeatedly said in filings that he’d returned all the company information he had in his possession (his laptop, phone and two thumb drives). B&W, meanwhile, cited forensic computer analysis that showed he’d downloaded thousands of files to six different thumb drives between mid-February and his March departure. The company had continued to demand the return of the remaining four drives.

In January, just weeks before the hearing, Glenn told his lawyers he’d found three more drives in his house that he didn’t know he still had. Two weeks later he said he had, in fact, know they were there all along, according to filings from his attorneys.

“I made some errors that I’m not proud of … I can only say that emotion took the place of decision making,” Glenn said at the hearing.

Bevin Alexander, B&W’s attorney in the case, declined to comment on the specifics of the case or what could come next.

According to the preliminary injunction, the court will revisit the case when discovery is completed or in June, six months after the hearing, whichever comes first.

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