US chemical society loses legal battle

The American Chemical Society (ACS) has been dealt a major blow in its effort to sue the Columbus, Ohio-based research software provider Leadscope for allegedly stealing its intellectual property. On 18 September, the Ohio Supreme Court affirmed previous rulings that the ACS owes millions of dollars to Leadscope and its founders, who claimed that the society expressly brought the trade secret case against them to harm their business.

‘A multi-million dollar verdict is a victory for the plaintiff, particular when they’re likely to receive most, if not all, of their attorney’s fees,’ says John Marsh, a partner with the Cleveland, Ohio law firm Hahn Loeser who focuses on intellectual property and trade secret litigation.

The saga began in 2002 when the ACS sued Leadscope and its three founders – who had worked for the ACS’s Chemical Abstracts Service (CAS) – claiming that the company was built upon stolen trade secrets.

The ACS had been developing a product called PathFinder, which was intended to help researchers access and organise chemical information available in the ACS’s databases, and Leadscope patented a similar software program. Around 60% of the ACS’s budget comes from revenue generated by CAS, court documents show.

When the case was tried in a lower court in 2008, jurors found no evidence of trade secret misappropriation, awarding Leadscope and its founders $26.5 million (£16.3 million) in damages on their counterclaims for defamation, unfair competition and intentionally damaging its business. They concluded that the ACS sued Leadscope in bad faith and an Ohio appeals court upheld that ruling in 2010.

Now the Ohio Supreme Court judges have agreed that Leadscope proved it was wronged and that the ACS offered no concrete evidence that the company stole its product. But it did absolve the ACS of the defamation charges, which constituted $15 million of the initial $26.5 million award, the ACS says.

Without having to pay out for defamation, the ACS will likely owe Leadscope over $10 million, Marsh estimates. He puts the figure at closer to $20 million with attorney’s fees and related expenses.

The chair of the ACS’s Board of Directors, William Carroll, called the ruling a ‘complex decision’ that demands careful review. But he said it won’t impact ACS’s member dues, products, staffing levels or programmes and services.

Meanwhile, Leadscope’s reaction was subdued. ‘We are still talking with the attorneys,’ the company's president and chief executive, Loftus Lucas, tells Chemistry World. He says the decision speaks for itself, adding: ‘I don’t know what the next step will be.’

Either party could request that the Ohio Supreme Court reconsider its decision. Alternatively, the ruling can be appealed to the US Supreme Court, although that seems unlikely because it doesn’t appear that any federal statutes or constitutional claims are at issue.