By Julius Melnitzer | July 8, 2025
A recent US$3.1-million award by a Florida jury in favour of Pliteq, Inc. (Pliteq, Inc. v. Mostafa, 2025 U.S. Dist. LEXIS 60316), a Canadian international engineering services and manufacturing enterprise, against a high-ranking Dubai-based employee who stole trade secrets demonstrates that — despite cross-border tensions — Donald Trump’s America may still be a favourable place for Canadian businesses to seek and obtain justice.
But it also demonstrates the significance of a strong employment agreement with well-drafted confidentiality provisions.
“Having a well-drafted confidentiality clause in an employment contract is vitally important for employers whose business relies on the competitive advantage gained by their trade secrets,” says Hendrik Nieuwland, a labour and employment litigator and partner with Shields O’Donnell MacKillop LLP in Toronto.
Indeed, as Kevin Kaplan, Pliteq’s lead trial counsel, told the jury, “The key to Pliteq’s success and its position in the forefront of industry is innovation and information,” including spending “over $26 million on research and development.”
Pliteq recycles more than six million tires annually to create environmentally friendly products and is a global industry leader in sound-reduction technology for high-rise buildings. Sixty-five per cent of its revenues originate in the United States.
The defendant, Maged Mostafa, was general manager of Pliteq’s Dubai subsidiary, a member of the company’s corporate executive council, and Pliteq’s vice-president, corporate development and marketing.
An employment agreement containing a strict confidentiality clause governed Mostafa’s relationship with Pliteq. It specifically prohibited the disclosure of each category of information ultimately misappropriated by Mostafa, who also acknowledged the sensitivity of his position by later signing a standalone confidentiality agreement that expressly limited his use of the information to “reasonably completing his or her employment or contractual duties.”
The evidence at trial revealed that Pliteq terminated Mostafa in November 2023 after discovering that, following a series of unfavourable performance reviews, he had effected a massive download of Pliteq’s highly confidential trade secrets to his personal accounts.
The data included proprietary information about Pliteq’s factory and manufacturing processes, factory design and equipment, and “recipes” for its products, as well as consultants’ identities, customer lists, and sales and product testing information.
Mostafa refused to return the data or confirm its destruction. He also threatened to disclose or sell the information to Pliteq’s competitors. And when Pliteq repossessed the company laptop in Mostafa’s possession, he complained to Dubai police that his personal property had been stolen.
Mostafa maintained his innocence until the pretrial conference, at which point he admitted liability for all violations except willful ones, leaving damages as the sole issue for trial.
It was at this point that the choice of the United States as the forum for the proceedings proved fortuitous. Paul Downey, Pliteq’s CEO, testified that Pliteq was “particularly” worried about the harm to Pliteq if competitors, “particularly those in the U.S. and Florida,” gained possession of Pliteq’s “corporate strategy, all the recipe data, and information.”
In many trade secret cases, damages are assessed by the extent to which the defendant’s new employer or the purchaser of the secrets benefited from the data. Pliteq acted quickly to prevent further disclosure by Mostafa but still claimed that the misconduct damaged its reputation and devalued the more than $26 million it had invested in research and development of its valuable trade secrets.
Although Pliteq believed that Mostafa was working with a competitor, it could not yet prove that allegation at trial. But the company’s lawyers emphasized to the jury that damages might not be apparent for years, as it would take a competitor some time to utilize the information, particularly the machine designs.
That argument fit in nicely with U.S. law, which doesn’t require actual disclosure to a third party as a prerequisite for damages: all that’s required is unlawful acquisition and “use,” with “use” defined very broadly.
The upshot was that the jury awarded $500,000 in compensatory damages under federal law, exemplary damages of $1 million based on Mostafa’s “willful and malicious” misappropriation, and $1.6 million in punitive damages under Florida law for “intentional misconduct” resulting in breach of fiduciary duty and unfair competition.
For Mostafa’s lawyers, however, the consequences went beyond the jury verdict. As a result of repeatedly using AI and not checking the results obtained, the defendants cited at least 10 “hallucinations”: non-existent cases, non-existent language in cases, and representations of propositions that the cases did not stand for.
“These AI hallucinations caused this court to waste a significant amount of time and resources searching for quoted language and propositions in cases that did not exist and searching Westlaw to find cases by citation number and then by case name to ultimately find out the cases did not exist at all,” the presiding judge stated. “In light of the foregoing, the Court refers the matter to the Ad Hoc Committee on Attorney Admissions, Peer Review, and Attorney Grievance for the United States District Court for the Southern District of Florida for further review.”
Julius Melnitzer is a Toronto-based freelance legal affairs journalist and communications and media consultant to the legal profession. He can be reached by email directly at julius@legalwriter.net or at his website, www.legalwriter.net.
RELATED ARTICLES
Standard NDA approaches reality
Caseway AI legal research tool eliminates “hallucinations”