A Lesson for the Valley: Thou Shalt Not Steal

By Torri Still
The Recorder/Cal Law

October 7, 1999

When David Kern filed a wrongful termination suit against his former employer, Palo Alto-based Varian Medical System Inc., little did he know that he would end up as the first person prosecuted under the Electronic Espionage Act.

Kern's case against Varian, Kern v. Varian, 752203 -- and the company's countersuit, Varian v. Kern -- should serve as a "warning call" to people who are considering stealing confidential information from their employers, Orrick, Herrington & Sutcliffe employment law partner Lynne Hermle says.

Hermle and associate Peter McMahon represented Varian in the counter-claim against Kern for misappropriation of trade secrets, unfair competition and breach of contract. In September, Santa Clara County Superior Court Judge Socrates Peter Manoukian awarded Varian, a supplier of equipment for cancer treatment, $3.5 million in damages and attorney fees. The ruling culminated four years of litigation. After Varian fired him, Kern filed suit in 1995, alleging breach of the employment agreement, among other claims. Only after the parties began arbitrating the matter in March 1997 did information come to light that would alter the course of litigation dramatically.

Kern joined Radiological Associates of Sacramento (RAS), a Varian customer, after he was fired. Employees at RAS reported to management that Kern had allegedly bragged to them about stealing information from Varian. RAS informed Varian of the suspected theft, and Varian countersued Kern. According to court documents, Kern -- an RAS employee at the time -- is accused of obtaining the information after a Varian technician accidentally left a laptop computer at a hospital in Sacramento in October 1996.

Kern is suspected of taking the laptop and -- although he had signed a nondisclosure agreement while working at Varian -- hooking it up to his own computer and downloading confidential information. Upon discovering that the information was encrypted, Kern allegedly recruited a subordinate to steal a security key from a Varian technician. He used the key to print out text that included Varian's trade secrets.

Hermle says Kern's boasting about the theft to fellow RAS employees was "part of the reason the U.S. attorneys got permission to try him." He is awaiting trial in U.S. district court in Sacramento on criminal charges under the Counter Espionage Act of 1996 and faces a jail term of up to 10 years. Orrick is not involved in the federal case against Kern.

The superior court decision, Hermle believes, is an object lesson for all Silicon Valley employees who are exposed to sensitive information. "If you are going to work in the Valley, you need to respect the access to confidential and proprietary information," she says. "There are ramifications if you take stuff, and you should know that it could come back and bite you hard."

Last updated 99/10/07
Uploaded from Today's Legal News, October 7, 1999, LAWNEWSNETWORK.COM.