DealLawyers.com Blog

With Bloomberg’s Matt Levine covering failed M&A and the misappropriation of trade secrets not once, but twice, recently, this topic shot to the top of my list for blogs this week. Luckily, speakers on the “Surveying the M&A Landscape” panel at Northwestern Pritzker School of Law Securities Regulation Institute shared some thoughts, and it’s on the agenda for tomorrow’s ABA M&A Jurisprudence Subcommittee meeting. The risk is this:

– From a seller’s perspective, that the buyer misappropriates trade secrets and terminates negotiations

– From a buyer’s perspective, defending claims after failed M&A because a seller has a motive and potential grounds for trade secret misappropriation allegations

The risk is not hypothetical either. As Money Stuff explains:

Phillips 66 Co. was accused of doing something like this to Propel Fuels Inc. in 2024, Novo Nordisk A/S was accused of doing something like this to Metsera Inc. in 2025, and just this month Post Road Group was accused of doing something like this to Planet Networks Inc.

Notably, in Propel Fuels, Inc. v. Phillips 66 Co.:

The jury reached a $604.9 million verdict for the plaintiff, representing Phillips 66’s unjust enrichment. The jury also found, by clear and convincing evidence, that Phillips’ actions were willful and malicious. The jury’s finding triggered further proceedings concerning whether the court should impose exemplary damages and, if so, how much those damages ought to be.

The court determined that the punitive damages waiver in the NDA was unenforceable and awarded damages of three times the potential purchase price, including the earnout. If that sounds especially punitive, compare that to the statutory cap plaintiffs sought of 2x the jury award, which was $1.2 billion. While the court found that the defendant’s misconduct was “reprehensible” and “duplicitous,” it also cited the defendant’s failure to follow some practices that other buyers acting in good faith might also not adopt.  

So, what’s a (concerned) seller and buyer (operating in good faith) to do to prevent misappropriation of trade secrets or trade secret litigation? At SRI, Wachtell’s David Katz and Milbank’s Iliana Ongun shared these tips for sellers:

– In the NDA stage, make sure seller’s commercial teams are considering what information they’re sharing with the buyer and what information they’ll regret having shared if the deal doesn’t go through.

– Stage due diligence until you narrow the funnel of buyers and be careful how you share commercially sensitive information. Consider requiring a “clean team.”

– If the buyer decides not to proceed, consider whether they’re obligated to tell the seller that they’re no longer interested.

This Cooley alert is focused on buyers (especially in the medical device industry) and shares these recommendations, saying a failure to follow these can “haunt a company in future litigation.”

– Create buffers between engineering decision-makers and third-party confidential information – employ a “clean team” for technical due diligences.

– Establish clear protocols regarding identification of materials considered trade secret by third parties.

– Isolate third-party confidential materials, and prevent any internal dissemination thereof.

– Train employees regarding confidentiality obligations for third-party trade secret information.

– Meredith Ervine