Brewer Science wins $10M judgment

Brewer Science Inc. was awarded a $10 million judgment on Sept. 9 after Missouri’s 20th Judicial District Court determined a company founded by a former employee and his wife sold products built with designs stolen from the Rolla-based microelectronics developer and manufacturer.

Former Brewer salesman Hai Xuan and his wife Hong Sheng formed Best Tools LLC and partnered with Jiangsu, China-based manufacturer Juangyin Hiatu Technical Co Ltd. to produce and distribute copies of proprietary spin coaters used in microchip manufacturing.

Brewer Science Intellectual Property Manager Becky Rich said Xuan was hired in 2006 as a chemical salesman and moved to equipment sales in February 2009.

“As soon as he went to work in the sales group he emailed what was taken from the Brewer Science server to his personal account,” said Brewer Science Chief Legal Officer Alan Gerson, adding stolen data included product blueprints, customer lists and pricing algorithms.

Gerson also claimed Xuan also made after-hours visits to photograph the equipment.

“He actually copied data sheets in our manuals verbatim,” Rich said. “He knew exactly what was in there.”

Gerson said a legitimate competitor, North Wales, Penn.-based Laurell Technologies Corp., also was losing business to Best Tools and representatives contacted Brewer Science about the company in late January 2012. The next month, Gerson said Xuan resigned, a day before the company planned to terminate his employment.

Xuan and Sheng could not be reached for comment. A business number in Rolla was disconnected, and Springfield Business Journal’s voicemail left with a St. Louis product sales line was not returned.

Court documents show the husband and wife did not appear in court and through legal representation withdrew a request for and waived their right to a jury trial. The Best Tools owners were ordered by Judge Robert Schollmeyer to pay more than $1.6 million in compensatory damages, $8.4 million in punitive damages, and $154,586 in attorney and forensic expert fees to Brewer Science.

The court also entered a permanent injunction against Best Tools and its partners, directing them to cease advertising and destroy product inventory and schematics, as well as customer data stolen from Brewer Science.

Product discrepancies
Best Tools, doing business as Smart Coater, reportedly advertised products as being made in America despite their Chinese origins.

Rich said Brewer Science, which also has manufacturing space in Springfield’s Jordan Valley Innovation Center, purchased a Best Tools’ spin coater in 2012 and found that despite similarities in appearance the equipment didn’t live up to its advertised capabilities, being unable to accept wafers of different sizes and lacking the ability to control speed and acceleration of the motor.

The machinery coats silicon wafers with chemicals for use in microchips by manufacturers, universities and research labs. U.S. Department of Defense contracts on file at USASpending.gov show the Washington, D.C.-based U.S. Naval Research Laboratory awarded Best Tools a $5,850 contract in January 2013 for equipment and supplies.

Rich said Brewer Science’s units, built to order from two base models, represent the largest volume of equipment sales for the company. She declined to disclose prices or sales figures, but indicated sales volume declined by 30-40 percent in the two years after the lawsuit was filed. According to Rich, a forensic account at the trial testified Brewer Science spent $1.37 million to develop the spin coater models and reported $250,000 in related loss profits. Based on profit damages, Gerson said lost revenue could be as much as $1.25 million.

“Between 2012 and when the injunction was entered, (Best Tools) sold at least 100 tools,” Gerson added.

Rich said the spin coaters are marketed in China as being the same device and the disparity could have negative consequences for Brewer Science’s reputation.

“In the Asian market – where a lot of these are located because they are used in manufacturing – people think we’re either overpricing our product or that the lower-quality tool is associated with our company,” Rich said.

Enforcement challenges
Amid Brewer Science’s first intellectual property case, officials say the company is taking steps to better protect proprietary information internally. While Rich said the incident couldn’t have been prevented, expanded patent and trademark protections might give Brewer Science the means for swifter legal recourse in the future.

Although the ruling prevents Best Tools from selling the equipment stateside, Rich said the company is limited in its ability to impose the judgment overseas where the products are still manufactured and sold.

“We’re going to have someone in China serve them with the judgment, which they then would technically be bound by. But I think getting that enforced would be very difficult,” Rich said.

Joseph Johnson, an intellectual property law specialist in Springfield, agrees.

“Collecting a judgment is sometimes harder than getting a judgment in court,” said Johnson, a partner at Lathrop & Gage LLP. “There is a uniform recognition of judgments here in the U.S., but that doesn’t always hold true in foreign countries.”

Gerson said Brewer Science won’t pursue the matter in a Chinese court, and the company doesn’t expect to collect a significant portion of the $10 million. Instead it will focus on advocating for stronger prosecution of intellectual property theft and trade secret piracy at the federal level.

“We’re going to try to get the Department of Commerce to impound any tools when they come into the U.S.,” Gerson said. “That’s the primary tangible thing we can do. We don’t need new laws, we just need what we have to be enforced.”