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April 22, 2009

ClearOne Awarded $9.7 Million in Trade Secret Misappropriation Case

By Patrick Barnard, Senior Web Editor, TMCnet

A federal court in Utah has awarded HD conferencing company ClearOne with approximately $9.7 million in damages as part of its trade secret misappropriation case against WideBand (News - Alert) Solutions Inc. and Biamp Systems Corporation.

In addition the court has granted a permanent injunction prohibiting WideBand from using ClearOne’s (News - Alert) proprietary telephony code and other products.

Biamp was named in the case because it bought ClearOne’s technology from WideBand, even though officials at Biamp allegedly knew that the technology was not WideBand’s to sell.

Last November a federal jury ruled in favor of ClearOne’s claim that three men working for WideBand Solutions, including a former ClearOne employee, had “willfully and maliciously” stolen ClearOne's trade secrets and used them for financial gain.

The ruling names three of WideBand's principals, Dr. Jun Yang (the former ClearOne employee), Andrew Chiang (previously affiliated with an entity that sold certain assets to ClearOne), and Lonny Bowers. Also named is a company owned primarily by Yang called Versatile DSP, Inc.

The court ruled that Biamp also infringed on ClearOne’s patented technology because it “deliberately ignored numerous warning signs suggesting that the AEC technology offered by WideBand was not WideBand’s to sell.”

“Given all the facts presented to Biamp at the time, it could not have held a good faith belief that its use of the WideBand code was valid,” court records state.

The court found that Biamp earned over $1.5 million “by purchasing the WideBand technology at half the price offered by ClearOne and then selling the technology at the same price it charged when dealing with ClearOne.”

Apparently the court wanted to make an example out of Biamp in order to “send a message deterring other companies from engaging in similar conduct."

In addition to the two companies, the court also ordered each of the individual defendants to pay damages, as there was “evidence of deliberate copying” of ClearOne's trade secrets. Specifically, the secret elements of ClearOne’s Honeybee Code were found on the defendants’ computers at WideBand’s offices. There was also evidence that the defendants tried to hide the code after it had been discovered.

The ruling specifically prohibits WideBand from using “(a) the AEC2w object code licensed to Biamp, (b) the computer code licensed to Harman Music Group, Inc. that was the subject of an October 30, 2008 preliminary injunction order, (c) WideBand’s FC101 product, (d) WideBand’s WC301 product, (e) WideBand’s WC301A product, and (f) WideBand’s Simphonix product.” What’s more the company can no longer continue to use the brand names that were associated with those products.

ClearOne intends to request an additional award to cover the cost of its legal fees.

All of the defendants can still appeal the decision.

ClearOne was represented by the Utah law firm of Magleby & Greenwood, P.C.

ClearOne made news on TMCnet earlier this month when it introduced a new Web-based customer service portal to enable its partners to conduct business at any time. Dubbed ClearOneXpress, the portal allows the company’s distributors, dealers and end-customer partners to place product orders, check shipping status, print invoices and make payments online. What’s more they can request and check the status of RMAs, view current promotions, and conduct live chat sessions with ClearOne customer service representatives.

Patrick Barnard is a contributing writer for TMCnet. To read more of Patrick’s articles, please visit his columnist page.

Edited by Patrick Barnard

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