A recent legal showdown in California, USA, has seen a jury rule that energy giant Phillips 66 (PSX.N) must pay biofuel producer Propel Fuels (Propel) an enormous $604.9 million in damages.
The pay-out comes after the former was ruled by a jury that it misappropriated the smaller company’s trade secrets.
Propel had accused Phillips 66 of exploiting confidential information, including financial data and business strategies, that had been shared during acquisition discussions. It was determined that ultimately, this knowledge was used to bolster its own renewable fuel operations.
Propel first filed its lawsuit in Alameda County in 2022. They alleged that Phillips 66 wrongfully obtained and applied Propel’s proprietary data, under the pretence of a potential buyout. The jury sided with Propel, concluding that Phillips had, in fact, used the acquisition talks as a cover to gather valuable business insights, which it later deployed to compete directly in the renewable fuel sector. The jury further concluded that Phillips 66’s misappropriation was both wilful and malicious, opening the door for the Court to potentially triple the damages awarded.
Based in Sacramento, Propel Fuels specializes in low-emission gasoline and diesel products. Their complaint revealed that in 2017, Phillips 66 had expressed interest in acquiring the company to enhance its renewable fuel portfolio in California, a state with strong incentives for low-carbon fuel alternatives. But by 2018, Phillips abruptly abandoned the acquisition, only to launch its own renewable fuel products the following year.
In their case Propel fuels argued:
“Before its discussions with Phillips 66, Propel had worked for more than 13 years to create the market for these fuels, which are important alternatives that improve air quality and help fight climate change. We were pioneers who helped create the market, and what Phillips 66 stole was the result of hard work by entrepreneurs who took the kind of risks that are the foundation for our entire modern economy[1].”.
As the case now presumably prepares to advance to a higher court, the present decision reinforces the immense value of trade secrets in corporate strategy. It also serves as a reminder of the critical importance of tracking and safeguarding such proprietary information.
In a recent publication, we discussed how trade secrets can be effectively combined with patents to create a comprehensive intellectual property (IP) strategy. For further details on this topic, including the role of trade secrets as a crucial element in a corporate IP strategy, feel free to reach out to the author, Dr Iain McCrindle.
Director, IP Strategy
Scintilla IP
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[1] https://biodieselmagazine.com/articles/jury-awards-propel-fuels-6049-million-for-trade-secret-misappropriation-by-phillips-66, an article written by Propel Fuels