Criminal probe now part of Moog’s stolen data case involving flight control software | Local News

Aerospace supplier Moog Inc. said far more data files containing trade secrets had been stolen than it realized in March when it filed the defendant its two former software employees of sued them and the aviation startup in they joined after leaving Moog, according to federal courts.

Now the trade secret theft allegation has prompted a criminal investigation, lawyers for Moog and the two former employees said during a civil hearing last week.

The government issued a “broad subpoena” to Moog, said Rena Andoh, a New York City attorney on the Elma company’s legal team.

“I have idea what charges they’re considering pursuing,” she told US Magistrate Judge Jeremiah J. McCarthy.

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Moog, in a federal lawsuit filed this week in Buffalo, said a software engineer who quit the company’s Los Angeles-area office in December took more than 136,000 digital files related to flight control software to her new employer, Skyryse, a six-year- old startup.

When Moog filed his federal lawsuit, the company said Misook Kim, a software engineer who quit the company’s Los Angeles-area office in December, took more than 136,000 digital files related to flight control software to her new employer, Skyryse Inc., a 6 -year-old startup. Moog has proprietary information accused of copying and delivering to Skyryse – under former Moog employee Robert Alin Pilkington’s data files containing Moog’s proprietary related to flight control technology.

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Moog now believes Pilkington downloaded about 1.1 million files of Moog data from his Moog-issued laptop onto an external hard drive on the day he provided Moog notice that he was leaving the company, and then later downloaded 130,000 additional files to another hard drive on his last day of employment, according to court papers filed by Moog’s lawyers.

Anthony D. Green, a lawyer for Kim and Pilkington, told the federal magistrate that a “grand jury has been convened” over Moog’s allegations.

“Now a criminal investigation is going on,” McCarthy said at Wednesday’s virtual hearing.

Any federal criminal charges could delay or at least complicate the civil case because the former employees’ lawyers would not want to provide information or answer questions in the civil case that could jeopardize them in a criminal case.

The specter of a criminal case comes amid tense exchanges among the companies’ lawyers in the civil case, with Moog accusing Skyryse of “ignoring the shocking scale of the misconduct of its current employees and former employees” and Skyryse saying Moog has made burdensome discovery demands to let it “root around in … the secret sauce of a competitor.”

Moog: ‘An additional 1.2 million files taken’

Moog, an aerospace and defense company with annual sales of approximately $3 billion and a global workforce of more than 13,000, designs and manufactures electric, electro-hydraulic and hydraulic motion controls and systems for applications in aerospace, defense, industrial and medical devices. Skyryse is a venture-backed tech aviation startup founded in 2016 that is privately held. It announced in October $200 million in venture funding to develop flight automation technology, and Moog said employees hired from Moog are believed to form a significant portion of Skyryse’s technical workforce.

Lawyers for Moog and Skyryse have squared off in the civil proceeding, with Skyryse insisting that Moog reveal the trade secrets allegedly stolen. But before doing that, Moog wants more information from Skyryse and a chance to see for itself any Moog data on dozens of Skyryse laptops and other devices.

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Skyryse Inc., based in El Segundo, Calif., agreed not to use any digital files or data in its possession from Moog or any former Moog employee.

“We’re in a situation where we don’t know the full scope of what they’ve taken nor do we know what they’ve actually used at this point,” Andoh told the judge.

Moog has said the copied material contains the source code of Moog’s proprietary software programs, which it said took more than 15 years to develop by dozens of Moog engineers at a cost of hundreds of millions of dollars. The Moog files cover essentially all of Moog’s flight control software built since 2007, the company’s lawyers say. The company accused the former employees of stealing information two to some 21 Moog programs across the company’s entire flight control software program.

Several court documents have been sealed and others redacted, only some elements of the civil case have been kept out of public view.

But available court documents and oral arguments reveal a lot has developed since Moog filed his lawsuit in March.

“Not only do we know more now than we did when the complaint was filed, the structure of the case has changed,” Andoh told McCarthy dramatically at a July 15 hearing. “We found out there was an additional 1.2 million files taken. Four employees that we’re aware of have been terminated from Skyryse in connection of this case.”

The fired employees include Kim and Pilkington, according to Moog’s court papers.

In April, Skyryse’s previous legal counsel told McCarthy during an emergency conference that Skyryse had discovered “likely, nonpublic Moog information at Skyryse,” according to court papers.

That information relates to Pilkington and Kim, “the people that came over in the last few months,” the former counsel said, according to court papers. “We have found enough that is does – it causes us concern.”

Also, “we have forensically discovered that since the complaint was filed certain information had been deleted,” said Skyryse’s then-counsel, Gibson, Dunn & Crutcher, a New York City law firm.

‘Likely just the tip of the iceberg’

Pilkington and Kim worked at Moog’s Torrance, Calif., facility before taking key jobs at Skyryse, which is based in El Segundo, Calif.

Moog said at least nine former Moog employees retained Moog information at the beginning of their employment at Skyryse and that Skyryse employees deleted relevant data and information related to the case after the lawsuit was filed.

“This is just the information Moog has discovered without accessing the dozens of devices and millions of files … and is likely just the tip of the iceberg,” according to Moog’s court filing on July 5.

For Skyryse to get a fair chance to prepare a defense to the “very, very severe allegations,” for starters, it wants Moog to identify the trade secrets, said Douglas E. Lumish, an attorney on Skyryse’s defense team, at the July 15 hearing.

“We’re turning the company upside down and producing all of this vast discovery when they haven’t identified a single trade secret,” Lumish said. “This case is not some extreme outlier that should be one that throws all the rules out the window.”

Rather than identify its trade secrets, Moog wants “virtually unlimited discovery into Skyryse’s business,” according to Skyryse’s court papers filed in June. “This has led to a wide-ranging fishing expedition by Moog.”

Skyryse: Moog allowed access to thousands

Skyryse has taken aim at the 4,000 to 6,000 current and former Moog employees and over 1,000 customers and suppliers that Moog has said may have had access to the data over the years.

“A staggering number of people may have had access to Moog’s alleged trade secrets,” according to Skyryse’s court papers filed July 13.

“This is unusual, to say the least,” Skyryse’s lawyers said in their court papers. “Far from safeguarding its alleged trade secrets or restricting access to them on a need-to-know basis, as one would expect for true trade secrets, Moog has apparently allowed access to them by thousands of people. The facts surrounding Moog’s treatment of its alleged trade secrets, once fully discovered, may prove fatal to Moog’s claims.”

In its court papers, Moog said it has a database that holds many types of proprietary information regarding the flight control software and programs, including schematics and other technical documents. There are some 4,000 Moog employees just in the US with access.

Moog says it “will show that it took reasonable measures to protect its trade secrets.”

In a July 22 decision, McCarthy said Moog will be required at the preliminary injunction hearing, which had been expected to be held in October, to identify the trade secrets which it claims to have been misappropriated in order for the court to gauge Moog’s likelihood of success and that Skyryse be informed in advance to enable them to prepare the defense.

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