Will nVidia pick up VP Bob Feldstein’s legal expenses?

It is now a matter of public record that nVidia VP Bob Feldstein and 3 others have been named by AMD in an action filed in Massachusetts. But KitGuru wonders who will be paying the legal expenses?

People change jobs.

There's no way we will ever go back to the medieval days of pledging a lifetime of service to one person or company, and receiving our training, living accommodation and daily bread in return. Nowadays, we all talk of career paths – the idea that what you are doing in the present, is simply one step towards an ultimate goal. Which means that when you take the next step forward, you're carrying ‘baggage'.

Looking at the detail available, KitGuru ponders just how dangerous that baggage can be?

IMPORTANT NOTE: Let's start this by saying that, at present, everything is in the investigation stage and far away from prosecution/punishment.

But a fundamental question remains: If we live in a world where some American States mandate a 6-24 month sentence for a first time offence of car theft, should stealing secrets (with a potential value in the millions) result in anything less?

AMD is alleging that 4 former employees, including former Vice President Bob Feldstein, have helped lift over 100,000 documents and gone after key personnel – in order to help nVidia at AMD's expense.

Bob pioneered AMD's deals into the major consoles etc, so you can see how the company might be concerned that nVidia would have access to the exact details of the ‘winning strategy' that means every next-gen console will have at least a little APU inside.

.

What strikes us as particularly serious, is that the alleged offences took place over an extended period of time.

Why is that such an issue?   Well, let's consider 3 situations:-

1. Green
   You leave working for one company in a specific market and then, after some months pass, you join a competitor (or found your own firm)
   That is the correct way to operate in most cultures and no one can have any complaint
   .
2. Amber
   Leaving one competitor, you take documents etc with you and immediately join another company in exactly the same market – and begin using the information/physical ‘stuff' from your old job to enhance your performance in the new role
   Dangerous ground,  but this no doubt happens a lot
   .
3. Red
   You leave one firm and start working for its closest rivals – taking information with you – then begin a process of recruiting other strategically key personnel – and they bring more information with them – building up a ‘team' in the new company – ready to take millions of dollars' worth of business from your old employer.
   Oh
   Whoops
   We seem to have move passed dangerous into ‘felony‘ territory
   .

Most VP-level personnel, on joining a rival, would leave a gap between one job and the next – being careful to leave all of their old documents behind and to avoid recruiting a group of people necessary to attack deep into one of their former employer's key customers.

AMD is alleging that Bob Feldstein took no such precautions.

That raises a second question.

Could someone at VP level, working for a company like nVidia, bring in all of these documents and personnel WITHOUT involving other people at VP level?

Certainly, according to the documents on file from AMD, nVidia VP Bob Feldstein does not stand alone. Also accused are:-

Richard Hagan
Senior Director of Engineering for nVidia

Manoo Desai
Senior Managers  at nVidia

Nicolas Kociuk
Awaiting a specific role at nVidia at the point where these charges were filed

Naturally, all four defendants had clauses in their AMD contracts against stealing stuff – but they also had clauses that said they would not work to recruit other AMD employees. Unfortunately for them, AMD claims to have a trail that leads from Feldstein and Hagan, through Desai, to Kociuk.

How bad could this get, how much will nVidia defend its people and who will pay for it?

Democrate Paul Sarbanes and Republican Michael Oxley put in place the Sarbanes-Oxley Act (SOX) of 2002. This is an Act to protect investors by improving the accuracy and reliability of company information – specifically anything that is likely to impact the value of a company.

In other words, if your company is likely to see a dip in share price because of ‘an issue', then you are required by law to get out ahead of that problem with full disclosure. To quote President Bush, “The era of low standards and false profits is over; no boardroom in America is above or beyond the law”.

The logic of SOX is clear enough, it says that senior executives take individual responsibility for the accuracy and completeness of corporate financial reports.

In other words, if you fail to disclose something which later results in a loss to shareholders – the board members will be in deep trouble. This is enough to keep companies honest. There's also a special section for ‘…fraud and records tampering as criminal offences', complete with sentencing guidelines.

In this situation, the upshot of SOX and other legislation is that if someone at VP level in a company IS proven to have acted in an illegal way – with financial implications for nVidia – then they WILL be fully exposed by their own side.

nVidia will do what it can to show that it has done nothing wrong and that the individual acted alone without the backing of the board.

One question is unclear.

With the American court system being so expensive to compete in, will nVidia pick up the tab for its employee's defences – or will they be required to stand alone?

Maybe the answer to that one question will actually tell us how much merit AMD's case has.

The last question here – and it's the one that will help decide if nVidia ends up paying punitive damages to AMD: Did any of AMD's IP make its way inside the nVidia corporate firewall?   If former AMD employees had illicit documents, but only on personal devices – then that's one thing – nVidia can claim that it cannot possibly be held responsible for documents held outside its protection. If nVidia were to disclose under SOX (or similar legislation) that the documents were ‘inside' its firewall, then that changes the game completely.

KitGuru says: It's hard to believe that AMD would go into court against someone like Bob Feldstein, unless they were absolutely certain of their facts and had done the background electronic forensics to ensure success. AMD has gone on record to say that nVidia VP Bob Feldstein connected 2 backup devices to his AMD PC on the day before leaving. Whoops.

Comment below or in the KitGuru forums.

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