IP Law Daily, TRADE SECRETS NEWS—Jane Street sues former employees and competitor for misappropriation of trade secrets, (Apr 16, 2024)

By Deirdre Kennedy, J.D.

The lawsuit alleges that the former employees breached their confidentiality agreements and shared trade secrets with their new employer, Millenium, who used the secrets for financial gain.

In an action for trade secret misappropriation under the Defend Trade Secrets Act (DTSA) and New York law, breach of contract, tortious interference, unjust enrichment, and unfair competition, financial trading firm Jane Street alleges that two former employees shared a proprietary trading strategy and related confidential information with their new employer and Jane Street competitor Millennium Management. The lawsuit brings allegations against the former employees and Millenium and seeks injunctive relief, specific performance, and damages (Jane Street Group v Millenium Management, filed April 12, 2024).

Jane Street Group, LLC (Jane Street) is a global proprietary trading firm in the financial services industry, which had developed and used a confidential and innovative trading strategy. Two of Jane Street’s former employees, Douglas Schadewald and Daniel Spottiswood, were intimately involved in the development and deployment of this specific proprietary strategy and thus possessed knowledge of Jane Street’s most valuable proprietary and confidential information. Jane Street reportedly expended significant effort and resources to keep its Trading Strategy confidential

In February 2024, Schadewald and Spottiswood resigned to join Jane Street’s competitor, Millennium Management LLC. Millennium is an investment management firm and hedge fund with more than $60 billion in assets under management. According to Jane Street’s complaint, Schadewald and Spottiswood delivered the proprietary trading strategy and related confidential information to Millennium despite contractually agreeing not to use or disclose Jane Street’s proprietary and confidential strategies and information outside of their employment with Jane Street.

Prior to Schadewald and Spottiswood joining Millennium, Jane Street was not aware of any other market player that had discovered or implemented any strategy comparable to the Trading Strategy. Schadewald and Spottiswood knew the immense value of, and the need to keep secret, Jane Street’s Trading Strategy.

Schadewald and Spottiswood agreed to the terms of Jane Street’s confidentiality and intellectual property agreement as a condition of employment with Jane Street. The agreement forbade the unauthorized use or disclosure of Jane Street’s confidential information, including proprietary trading strategies, and explicitly survives the end of their employment with Jane Street. Per the agreement, neither Schadewald nor Spottiswood were permitted to disclose Jane Street’s proprietary trading strategies to Millennium or to use that confidential information within the scope of their employment at Millennium.

The complaint alleges that within weeks of Schadewald starting at Millennium, it became apparent that a competitor was executing Jane Street’s Trading Strategy and capitalizing on the same opportunity as Jane Street, directly harming Jane Street in a competitive market. First, Jane Street’s profits from the Trading Strategy significantly decreased at almost exactly the same time Schadewald began at Millennium. Second, shortly after hiring Schadewald, Millennium targeted and poached Spottiswood, who was intimately involved with, and had detailed knowledge of, the Trading Strategy due to his managing of its implementation for Jane Street. Additionally, immediately following Schadewald starting at Millennium, a new entity entered the same market and placed orders mirroring the Trading Strategy.

Jane Street avers that this use and disclosure of its trade secrets and confidential information is not only expressly prohibited by the confidentiality agreement, but is also an egregious misappropriation of its closely guarded trade secrets in the face of a clear and known duty by both former employees to maintain the secrecy of this information. Further, Jane Street alleges that Millennium would be well aware of the continuing obligations Schadewald and Spottiswood owe Jane Street as former employees, which prohibit use and disclosure of Jane Street’s trade secrets and confidential information. Jane Street maintains that the use and disclosure of the Trading Strategy thus violates state and federal trade secret law.

In an attempt to protect its intellectual property and stop any harm caused by a potential breach of confidentiality and intellectual properly obligations and the misuse of trade secrets, Jane Street seeks injunctive relief, specific performance, and damages.

The Case is No. 1:24-cv-02783-PAE.

Attorneys: Alex Spiro (Quinn Emanuel Urquhart & Sullivan, LLP) for Jane Street Group, LLC.

Companies: Jane Street Group, LLC; Millennium Management LLC

News: TradeSecrets NewYorkNews