13. United States v. David B. Kern 99 CR 15 DFL (E. D. Calif. 3/5/99).
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David Kern copied proprietary information from a laptop computer
inadvertently left by a service technician for Varian Medical Systems,
Inc. at a hospital where Mr. Kern serviced the million-dollar cancer
treatment Varian machines for a competitor (Sacramento-based
Radiological Associates). "In the course of misappropriating Varian's
trade secret, the defendant copied files from the Varian service
technician's laptop after hooking it up to his own desktop computer
using a Laplink program." David Kern commenced a wrongful termination
suit against Radiological Associates after he was fired (June 1995) and
then Varian entered its appearance and filed a cross-complaint against
Kern for trade secret misappropriation (which occurred in October
1996).
Further details of the case were provided by Russ Atkinson (now Senior
Manager for Netscape, AOL West) at the recent High Technology Crime
Investigation Association (HTCIA) International Conference in Chicago.
David Kern's deposition was taken in the civil action. During the
deposition, Kern admitted that the Varian files which he copied to his
desktop computer were proprietary. When then asked whether he had
permission to copy the files, his lawyer in the civil case advised Kern
to "take the Fifth Amendment." and he refused to answer the question.
The civil deposition was videotaped under oath and the transcript was
subsequently turned over to the FBI. Apparently, Kern had also
obstructed civil discovery by refusing to turn over his computer files
for inspection and copying.
The FBI then commenced an investigation and grand jury subpoenas were
issued for David Kern's computer. Thereafter, Varian's technicians, at
the request of the FBI, reviewed the contents of the recovered files,
identified the theft of proprietary information, and provided original
copies to the FBI. Thereafter, in the civil suit, the trial court
awarded sanctions barring Kern's testimony and evidence for failure to
comply with civil discovery requests and entered summary judgment
awarding Varian $3.5 million in damages. In the criminal action, a
pre-indictment plea agreement was worked out, but Kern reneged, his
attorney was fired, and Kern was thereafter indicted on March 5, 1999.
On October 25, 1999, the Los Angeles Times quoted Russ Atkinson, a
former FBI special agent and legal advisor who was second in command of
the FBI's high-tech task force in San Jose, California. Atkinson cited
the $3.5 million civil judgment stating that the man might never have
been caught if he hadn't bragged of his deed to associates who notified
Varian. The engineer is now awaiting criminal trial which would be the
first criminal prosecution under the EEA in California.
Ms. Kathy Dunlap, a Radiological director, has acknowledged in the
press that "We did contact Varian because we had questions about the
information we had." On January 13, 2000, David Kern pled guilty to one
count of theft of trade secrets. On April 4, 2000, David Kern was
sentenced to 1 year imprisonment and 3 years supervised release.