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Screenshot of a breaking news alert e-mail from Q2 2017
LeapRate Exclusive… LeapRate has learned that Viral Tolat, former CTO of FX technology products provider Integral Development Corporation and now CTO of rival EBS BrokerTec, a unit of NEX Group PLC (LON:NXG) (formerly known as ICAP plc), is facing a jury trial for misappropriation of source code taken from Integral to EBS, as well as breach of fiduciary duty, copyright infringement, and breach of contract.
Court documents also indicate that EBS has been successful in taking business away from Integral since Mr. Tolat moved from Integral to EBS – but possibly because of the source code and other trade secrets he took with him to his new employer.
Some background… After Viral Tolat left his CTO role at Integral to take a similar position at EBS in 2013, Integral sued Tolat, claiming that he copied and took Integral source code and other trade secrets with him, which he then used at EBS.
Integral’s claims against Tolat were dismissed by a US District Court decision in early 2014. However LeapRate has now learned that an appeal made by Integral has been successful, with Tolat now facing a trial by jury in California for the aforementioned offenses.
More on the Appeals Court decision follows below. However we’d first note that the ongoing litigation is also a very personal one. Viral Tolat met his Integral co-founder Harpal Sandhu at Stanford University more than 25 years ago, with the two brilliant engineers and friends combining forces post graduation to start Integral, where Sandhu remains CEO. We understand that Tolat’s departure to rival EBS was viewed by Sandhu as a personal betrayal, after the two had started and run Integral together for 20 years.
In its decision, the U.S. Ninth Circuit Court of Appeals in San Francisco, CA noted:
- ‘undisputed facts’ show that Tolat copied at least some of Integral’s source code to his personal device and tried to cover up the evidence of said action,
- possibility of use of Integral source code in the development of EBS Direct,
- evidence of damages to Integral’s sales and equity value,
- allows for immediate commencement of jury trial in California.
Some quotes from the appellate court’s decision:
There is evidence in the record that Tolat copied at least a portion of Integral’s source code on to an external hard drive… shortly before he planned to retire from Integral. There is also evidence that… he tried to cover up the evidence that he had transferred the files to his personal device.
There is also evidence that, after Tolat joined EBS, EBS released a product – EBS Direct – that competed directly with some of Integral’s products. A fact finder must determine whether Tolat actually gave Integral’s source code to EBS and whether EBS used the source code to develop EBS Direct.
There is evidence that EBS Direct cut into Integral’s sales and that the resulting loss of revenue also caused Integral’s equity value to decrease.
Tim Mahota, General Counsel for Integral commented on the appellate court’s decision:
We are pleased and agree with the Ninth Circuit’s ruling in the case. We look forward to presenting the evidence of Tolat’s actions to a jury and obtaining a just result for Integral and its shareholders.
The court’s decision on the appeal can be seen here (pdf).