Vade Secure To Pay Proofpoint $14M For Trade Secret Theft: Jury

‘We appreciate the jury sending a strong message that the theft of source code and misappropriation of trade secrets is unacceptable,’ says Proofpoint CEO Gary Steele after a jury ruled in the company’s favor.

Vade Secure and Chief Technology Officer Olivier Lemarie owe email security competitor Proofpoint $14 million for stealing trade secrets, a federal jury ruled last Friday.

Hem, France-based Vade Secure was found guilty of infringing upon at least one of Proofpoint’s copyrights and unlawfully using most of the trade secrets flagged by Sunnyvale, Calif.-based Proofpoint. Lemarie, who was a VP at Cloudmark from 2010 to 2016, was accused of sharing trade secrets with Vade Secure after joining the company in 2017. Proofpoint bought Cloudmark in 2017 for $110 million.

“While we welcome fair competition and collaboration within the cybersecurity community, the misappropriation, copying and theft of our intellectual property required us to vigorously enforce our rights,” Proofpoint Chairman and CEO Gary Steele said in a statement. “We appreciate the jury sending a strong message that the theft of source code and misappropriation of trade secrets is unacceptable.”

[Related: Proofpoint Alleges Ex-Exec Took Trade Secrets To Abnormal Security]

Of the 20 trade secrets Proofpoint accused Lemarie and Vade of misappropriating, the California-based jury found that Vade’s improper use of the trade secrets was “willful and malicious” in 15 of those instances, which allows U.S. District Court Judge Maxine Chesney to increase the amount Proofpoint is owed.

According to the 19-page verdict, Proofpoint will get $13.5 million for unjust enrichment and $480,000 for breach of contract but $0 for actual loss. Proofpoint said the court’s decision on punitive damages is expected in late October.

Lemarie was additionally found guilty of breaching his employment agreement with Cloudmark. The jury, however, didn’t find that Lemarie’s misuse of the trade secrets was willful and malicious. Vade Secure didn’t immediately respond to a CRN request for comment, but told The Register it would be evaluating its next steps in the coming days.

“While we were hopeful we would be successful on all claims, we are pleased that the jury saw that Proofpoint and Cloudmark’s claims were an overreach as evidenced by their decision on damages,” Vade told The Register in a statement. “As a core whose core values are integrity and innovation, we don’t believe this outcome accurately reflects who we are.”

Proofpoint said it told the eight jurors that Vade unlawfully took, copied, and used Proofpoint’s trade secrets and copyrighted source code part as part of several Vade products, including Vade for Microsoft 365, Email Content Filter, Vade Cloud, and Vade MTA Builder. The company said it’ll also be seeking injunctive relief from the court to address ongoing and future harm by Vade and Lemarie to Proofpoint.

“Since filing the lawsuit in July 2019, Proofpoint has uncovered evidence confirming that Mr. Lemarie … took and used Cloudmark’s confidential and proprietary information and source code when he joined Vade Secure as Chief Technology Officer in 2017, including by literally copying Cloudmark source code into Vade Secure’s code,” Proofpoint wrote in an April 2021 blog update.

According to Proofpoint’s original complaint in July 2019, Vade’s new email security product was a major factor in the company’s ability to secure nearly $80 million of funding from investor General Catalyst a month earlier. The Series A funding from General Catalyst in June 2019 represents nearly 90 percent of Vade’s total funding to date, according to Proofpoint.

“Vade has been developing an MTA (Message or Mail Transfer Agent) product that it intends to launch by the end of this year (2019) and, as explained by Lemarie himself, is intended to displace Cloudmark’s MTA by offering a similarly flexible, cloud-based MTA,” Proofpoint alleged in its 26-page complaint.

Proofpoint has been busy on the legal front, alleging last month that ex-Director of National Partner Sales Samuel Boone shared with Abnormal Security’s sales leaders and engineers a ‘battlecard’ that outlines Proofpoint’s strategies for competing against Abnormal’s sales tactics. Boone started in May as Abnormal’s director of channels and pushed back on Proofpoint’s allegations in a response filed Aug. 6.

“Proofpoint was never interested in a practical, good faith resolution of a dispute over documents Boone took with him from Proofpoint,” Boone’s lawyer Thomas Nesbitt wrote in a 73-page response. “Rather, Proofpoint was apparently interested only in punishing Abnormal and coercing Abnormal into not hiring any of Proofpoint’s approximately 3,800 at-will employees.”