Lawsuit: CDW, Other Firm Hijacked IP From VAR

A small IT solution provider has filed suit against one of its clients and channel partner giant CDW alleging the two stole its intellectual property.

Contour Data Solutions, a Doylestown, Pa.-based solution provider, on Dec. 1 filed a second amended verified complaint in the U.S. District Court in the Eastern District of Pennsylvania alleging that its customer NAES, the customer’s solution provider CDW, and several individuals stole Contour’s intellectual property.

That intellectual property was an IT system that Contour said it implemented for Gridforce Energy Management, which was later acquired by Issaquah, Wash.-based NAES, which provides construction services to power generation, oil and gas, and petrochemical industries.

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When contacted for more details, Contour referred CRN to its lawyer who declined to comment about the lawsuit. NAES and CDW did not reply to a request for more information.

In the lawsuit, officially known as civil action No. 2:20-cv-03241-CMR, a copy of which was obtained by CRN, Contour said Gridforce in 2013 approached Contour for help in building from the ground up an entirely original IT system to operate as a utility while satisfying regulatory requirements, and in 2014 signed a managed master services agreement, or MMSA, with Contour.

Contour, in the lawsuit, claims it spent a year and thousands of man-hours to create the new IT system on a custom basis, particularly since Gridforce did not provide any templates. The solution provider also claims it had to purchase software, licenses, and hardware to go with its custom configuration to meet Gridforce‘s requirements.

“The creation of Gridforce’s IT system required Contour to author tens of thousands of lines of copyrightable/copyrighted computer source code, scripts, and rules. This material was entirely original–created only by Contour for use only by Gridforce–and unique, and was the heart of the Gridforce system. Without this copyrightable/copyright Contour work product, the software, licenses, and hardware Contour purchased for use in the Gridforce system were virtually useless,” Contour alleged in the lawsuit.

Contour also alleged that it purposely negotiated the contract price and provisions of the MMSA “to ensure that Contour would retain the rights to its Confidential Information and Trade Secrets and that Gridforce‘s use of the same would only be in accordance and pursuant to the MMSA.”

As part of the MMSA, Gridforce could no longer use any intellectual property related to the IT system after the two companies ended their relationship, and Gridforce would have to return it to Contour, the lawsuit alleges. Gridforce, however, owns its own business data.

The MMSA was initially signed for a 36-month term with 12-month automatic renewals after that unless terminated by either Gridforce or Contour. Any changes sent as service order forms or SOFs extended the MMSA until the last SOF expired or was terminated, according to the lawsuit.

While the terms of the MMSA were under discussion, Gridforce told Contour it could not afford the upfront costs, and so agreed to pay an upfront fee of $128,775 along with a monthly payment of $79,804.27 per months for five years. Within a year, Gridforce agreed to increase the monthly fee to $100,999.38 and signed a new 60-month term, according to the lawsuit.

Contour alleges that there were no issues with the MMSA until September 22, 2016, when Gridforce sent a letter about alleged “material breaches” of the MMSA by Contour, particularly in relation to an alleged failure to Implement a compliant National Energy Regulatory Commission, or NERC, critical infrastructure protection (CIP) reliability program by July 1 of the year. Contour responded that the CIP issue was Gridforce’s responsibility, and Contour could not have performed the required tasks without a formal request from Gridforce. After that, Gridforce did not raise any issues related to CIP compliance until February of 2020, according to the lawsuit.

Meanwhile, NAES in 2017 acquired Gridforce, and in or around the Spring of 2018 the two secretly decided that Gridforce did not wish to honor its MMSA commitments, and decided to “undertake the theft of the Contour-created IT System” and misappropriate Contour‘s confidential information and trade secrets, Contour alleged.

Several NAES employees were assigned in 2019 to “lift and shift” the Contour-created IT system and Contour‘s intellectual property, taking care to make sure Contour did not know about the project, but after finding the project difficult, contracted CDW to do it, Contour alleged. That, according to the lawsuit, required a CDW employee to access Contour’s protected computer systems based in Utah and Pennsylvania from CDW’s Texas offices. Contour alleged that CDW did so despite knowing that Contour owned the computer systems and servers that CDW breached without first gaining Contour’s authorization.

According to the lawsuit, Gridforce, NAES, and CDW would have seen a disclaimer about Contour‘s ownership of the IT system and a warning against unauthorized use. Because Gridforce, NAES, and CDW were forced to “maneuver around” Contour’s ”roadblocks,” it was clear that CDW ”knowingly and actively participated in the concealment of the theft of the Contour-created IT system,” the lawsuit alleges.

In December of 2019, NAES informed Contour it would terminate the MMSA on June 27, 2020. However, according to Contour, the MMSA was set to expire on August 11, 2023, and Contour told Gridforce that while it had the right to not renew the MMSA, it still needed to pay outstanding invoices and pay the monthly fees for the remainder of the term of the MMSA. Those invoices with interest totaled just over $400,000, according to the lawsuit.

Gridforce on February 7, 2020, sent Contour a termination letter which, according to the lawsuit, for the first time since 2016 referenced allegations of material breaches of the MMSA.

Contour said in the lawsuit it learned around October of 2020 during the “lift and shift” of the Contour-created IT System and Gridforce/NAES along with CDW destroyed about 15 percent of that system and Contour‘s confidential information. Contour also alleged that NAES has refused to provide ”requested information confirming that Gridforce has ceased using–and has not used since February 7, 2020–Contour’s Confidential Information and Trade Secrets” and has not provided that information to any third party.

Contour also alleges that Gridforce declines to prove log file information that would show whether the company misappropriated and altered that information for its new system, and that NAES has declined to compare the Contour-designed system to the work done by CDW.

In the lawsuit, Contour is suing Gridforce/NAES, CDW, and certain individuals for seven counts including breaching the Contour MMSA, misappropriating trade secrets, violating the Federal Defend Trade Secrets Act, conversion and/or negligent destruction of property, violating the Federal Computer Fraud and Abuse Act, violating the Federal Stored Communications Act, and violating the Texas Harmful Access by a Computer Act.

Contour is asking the court to enjoin the defendants from misappropriating, using, and or disclosing its confidential information; force defendants to return any information, documents, software, materials, work product, or equipment provided by or taken from Contour; force an accounting and disgorgement of all profits Gridforce earned while using the Contour confidential information; force payment of unpaid invoices along with interests, as well as pay the monthly payments through the remaining life of the MMSA, and pay compensatory and punitive damages.RELATED TOPICS:

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