In December, San Francisco startup Capella Space launched the first satellite in its planned “constellation,” a first-of-its-kind array that could provide on-demand imaging from space. But according to a lawsuit from Capella’s former vendor, MMA Design, they did it with the help of stolen trade secrets — conveyed by MMA’s co-owner.
The litigation could get more convoluted now that the co-owner, co-defendant Thomas Harvey, is countersuing his own company, as well as MMA’s other co-owner and a custodian. Harvey alleges they’re conspiring to “freeze him out” of his 50% stake in MMA, according to court documents filed last week.
A Modern Space Race
MMA, based in Louisville, invents solar arrays and antennas for satellites. The original lawsuit, which intellectual property law firm Sheridan Ross filed on MMA’s behalf in November, centers around the company’s work in 2016 as a vendor for Capella.
Capella hired MMA to design technology for satellites it was developing with the goal of establishing a group of synthetic aperture radar, or SAR, satellites in Earth’s orbit. The SAR imaging field is a modern commercial space race where several companies are “vying to establish themselves and be ‘first to market,’” according to the complaint.
Capella became the first U.S. company to launch a SAR satellite, Denali, on Dec. 3, which according to company press release will allow Capella to “progress toward reliably delivering hourly information and imagery in any condition anywhere on Earth.”
MMA and Capella worked together on the SAR development for most of 2016 until Capella cut ties with MMA. It hired Harvey two days later as an independent consultant to carry on its antenna and solar array projects, according to the complaint. MMA claims Harvey took his company-owned computer and thousands of downloaded files with him to perform work for Capella along with “proprietary spreadsheets, presentations, designs, and technical specifications.” MMA’s trade secrets helped Capella design its satellite “faster and cheaper,” according to the complaint.
MMA’s lawsuit, which Senior Judge Marcia Krieger is presiding over in Colorado federal district court, includes state and federal trade secret misappropriation claims against Harvey and Capella. It also alleges unjust enrichment against each defendant and breach of contract against Capella.
Attorneys from WilmerHale’s Denver office are defending Capella. WilmerHale and Sheridan Ross each declined to comment for this article citing policies on pending litigation.
Harvey contends, however, that any claims involving his work with Capella are barred because they’re supposed to be handled in the ongoing arbitration between him, MMA and co-owner Mitch Wiens. He is seeking to have MMA dissolved, and Wiens and the company filed the trade secrets suit for the “ulterior purpose of delaying the order of dissolution” issued by the arbitrator, according to his counterclaim.
A Partnership Crashes to Earth
Long before Harvey left MMA to work with Capella in September 2016, his relationship with the company he half-owned was strained. After two years of helping to grow MMA and its technology, Harvey became “dissatisfied” with the company and Wiens, according to the complaint: “This influenced Harvey to repeatedly and progressively take actions that benefitted himself to the detriment of MMA.” Harvey and Wiens were 50/50 member-managers of the LLC after they bought out a third partner in April 2014.
MMA claims Harvey began pushing to do independent consulting projects on his own in 2009, and that Wiens disapproved because Harvey would be working MMA’s competitors and potential customers. While the company was working with Capella, Harvey secretly did consulting for a Capella competitor, Iceye, and he took a paid week of vacation from MMA to go perform the work in Finland, according to the complaint. He also did independent work for another company, River Front Services, allegedly without telling MMA.
In summer 2016, MMA and Harvey argued over his work hours, which Harvey wanted reduced, and his inventorship rights, which he refused to re-assign to MMA on a patent application, according to the complaint. He resigned in August 2016. MMA claims that after it discovered Harvey’s independent consulting business, TJ Harvey Engineering, it reminded him that he was still a member-manager of MMA, with all of the fiduciary duties that entailed, even though he was no longer an MMA employee.
About a week after he’d resigned, Harvey sued Wiens and MMA in Boulder County District Court for breaching their operating agreement and fiduciary duties, and Wiens and MMA countersued for Harvey for breach of fiduciary duties. The case wound up in arbitration, which led to an Interim Award about a year later.
In the meantime, Capella broke off its relationship with MMA on Sept. 20, 2016, after suddenly making unreasonable requests as an excuse to sever ties, MMA alleges. Harvey emailed Capella CEO, Payam Banazadeh, on Sept. 22 letting him know he left MMA and could come work for Capella through his own independent consulting company.
“Sorry about your departure from MMA and congrats on the TJ Harvey Engineering!” Banazadeh said in a reply.
MMA claims that when Harvey began working with Capella, they discussed “find[ing] a way around the MMA patent” to avoid infringement as Capella implemented Harvey’s plan to develop deployment assemblies for the satellites, but they ignored trade secret protections.
A partly redacted section in the complaint describes the tape-deployed high gain reflectarray, or T-DaHGR, that Harvey designed for Capella allegedly using MMA’s IP. The trade secrets associated with the T-DaHGR aren’t so much in the reflectarray’s design, as that information is disclosed in the MMA patent, but in how to design, manufacture and customize it, according to MMA. “Upon information and belief, Harvey and Capella stole these trade secrets.”
Harvey is named an inventor on at least two of Capella’s provisional patent applications, according to MMA. MMA claims that any inventions he created for Capella belong to MMA under Colorado law. “Harvey’s primary duties at MMA were to develop and invent novel technologies around deployable satellite structures. Harvey was thus inventing for Capella in the exact same field in which he was supposed to be inventing for MMA.”
The Counterclaim and the Custodian
In his reply and counterclaim filed Aug. 5, Harvey contends that much of the technology MMA describes in its complaint isn’t proprietary, a trade secret, confidential or known only by MMA. He argues that MMA’s claims are barred by the ongoing arbitration, among other defenses.
The arbitrator, Steven Meyrich, ordered MMA’s dissolution seeing Harvey and Wiens were “at total impasse” over their operating agreement. Meyrich also required Wiens to get Harvey’s consent before making certain business decisions and to give Harvey access to MMA financials and records. Meyrich appointed a custodian, Patrick Donovan, to move the dissolution forward.
But Harvey claims the custodian was biased against him, amounting to a civil conspiracy.
“Wiens and Donovan then worked together to turn MMA’s resources against Harvey in an effort to delay the dissolution of MMA,” according to the counterclaim. Donovan is assisting Wiens with the “meritless” trade secret lawsuit and at the same time insists that MMA can’t be valued for the dissolution until the case is resolved, Harvey argues.
Donovan hired Wiens’ attorney to represent MMA, which is essentially siding with Wiens in the arbitration, Harvey maintains. As half-owner, Harvey is therefore paying half the legal costs for MMA to oppose him, according to the counterclaim, and Donovan is also spending MMA assets to sue Harvey in federal court over issues already in the arbitration’s jurisdiction.
“The real reason for … the lawsuit is to delay the mandatory dissolution order, freeze out Harvey and force Harvey to turn over his 50% ownership interest to Wiens at pennies on the dollar,” the counterclaim alleges.
Harvey is being represented by Podoll & Podoll, which declined to comment for this story.
Podoll & Podoll is representing a plaintiff in a separate case against Donovan. Developer Leathem Stearn is asking the Pitkin County Court to remove Donovan as a receiver on a mansion in Aspen.
Donovan allegedly failed to file required financial reports and mishandled the property to the point that it “jeopardized” the property’s value, and that he broke neutrality to “align with the lender,” according to the petition for removal.
The petition also makes reference to the Harvey-MMA dispute, claiming “[h]is conduct in that case is eerily similar to this case.”
“Donovan’s conduct in the custodial case … demonstrates a pattern and course of conduct that is testimony to both Donovan’s lack of competence, and misuse and abuse of his fiduciary role.”
The petition for removal, filed May 24, has an evidentiary hearing set for next month.
—Doug Chartier, [email protected]