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What It Costs to Rebuild Stolen Know-How: The Arxada Trade Secrets Appeal and What It Means for Inventor Teams | Autodesk Inventor | Register and Certify Ownership of CAD design

2026-11-02 15:21 News
On 28 October 2026 the Delaware Supreme Court heard the appeal in Harvey v. Arxada Holdings, a trade secrets case in which a company founder and his two nephews were ordered to pay for formulas, data sheets and photos they took when they left. The core of the award is $24.2 million in "avoided costs": what the court found the new competitor saved by not having to recreate that information itself. The defendants say that estimate is inflated. No decision has been issued yet.
The case is about chemical formulas, not CAD files. It still matters to anyone who builds products in Autodesk Inventor, because it shows in unusual detail how a court puts a price on stolen technical know-how. The Court of Chancery did not ask what the formulas would sell for. It asked how long they took to develop and what it would cost to build them again. For a manufacturer, that is the same question you would face if someone walked out with your part models, assemblies, drawings and bills of materials.
The opinion also lists which protection measures the court accepted as reasonable, and how the files left: flash drives, a misleadingly named folder, an email forwarding rule and a phone set to delete old messages. Each has an equivalent in an office that runs Inventor and Vault.
TL;DR: if your designs are ever taken, the damages may depend on what they cost to build. Keep the records that prove it.

In Arxada v. Harvey (Delaware Court of Chancery, 28 January 2026), the founder of a chemical company and his nephews were held jointly liable for $0.9 million in lost profits and $24,224,125.59 in avoided-cost disgorgement, plus the same total again as exemplary damages and attorneys' fees. The appeal was argued on 28 October 2026; Bloomberg Law reported that the justices looked poised to uphold the ruling, but there is no decision yet. For Inventor teams the lesson is practical: know which files are your trade secrets, keep evidence of the effort behind them, restrict and log access, watch bulk copies and departures, and keep dated proof of each key version.

What happened in Arxada v. Harvey?

Michael Harvey founded Enviro Tech Chemical Services in California in 1991 and ran it for thirty years. The company makes microbial control products, including peracetic acid (PAA) products and bromine-based biocides, mainly for agriculture, food and beverage customers. Arxada, a global specialty chemicals group, bought it for $450 million. Under the sale agreement the founder kept working for the company and accepted restrictive covenants, including a non-compete. His two nephews, Phil and Aaron Harvey, stayed on in senior roles but were not bound by those covenants.
According to the post-trial opinion by Vice Chancellor J. Travis Laster, the founder fell out with the new owner and was told in August 2022 that he would be terminated. He asked to stay until 17 August, saying he needed time to set up a personal email account. Before he left, the company's IT director set up a forwarding rule in Microsoft Exchange that sent his company email to his personal address and deleted the forwarded copies so that nobody would notice. He kept reading and answering employee and customer emails after his termination.
Forensic reports showed what left with the family. The founder copied about 1,700 electronic documents to a flash drive on his last day and took boxes of regulatory files and 1,051 formula sheets. One nephew downloaded more than 16,000 documents in August into a folder he named "safety review": sales data, forecasts, supplier data, label files, quality control data sheets, pictures of equipment and facilities, and 220 formulas. The other nephew downloaded 7,501 documents, mostly customer information, to a flash drive. Both nephews declined separation agreements with confidentiality terms and resigned in September 2022.
The nephews started a competitor, Capacity Chemical, with $4 million the founder arranged for them. The flash drives, holding more than 25,000 company documents, were never produced in court, and after the lawsuit began the founder set his phone to delete messages older than thirty days. The court found misappropriation of trade secrets, breach of the founder's covenants and tortious interference by the others.

How did the court put a price on the stolen information?

The buyer's lost profits were modest: $0.9 million. The large figure came from unjust enrichment measured as avoided costs, meaning the development work the new competitor did not have to do because it had the files. Witnesses described the work needed to recreate the formulas, and the court accepted that the time involved is typically measured in years. An expert then turned that evidence into a figure.
The court found the avoided costs to be $24,224,125.59: $22,858,512.60 for the formulas the founder took, $1,315,953.03 for other formulas a nephew took, and $49,659.96 for one neutralizer formula together with product labels, safety data sheets and technical data sheets. It called the expert's method conservative. He valued only a subset of what was taken because of the sheer volume of information, only formulas the company owned, and only labour costs, not the capital spent to develop and commercialise the products. Exemplary damages for wilful and malicious misappropriation were set at the same total of $25,124,125.59, and the buyer can recover its attorneys' fees.
The court rejected a royalty-based alternative because the defendants had taken nearly everything about the business, which the buyer's expert called a "company in a box". The founder is also enjoined from breaching his covenants until 24 October 2029.

What happened at the Delaware Supreme Court on 28 October?

The appeal, No. 150, 2026, was argued in Dover on 28 October 2026. Law360 reported that the founder and his nephews asked the court to overturn a judgment it puts at nearly $69.2 million, arguing that the award rests on an inflated estimate of what it would cost to recreate the formulas, while Arxada argued that the defendants should not profit from taking them. Law360 did not break that figure down; the Chancery amounts above do not include interest or attorneys' fees.
Bloomberg Law reported after the roughly 50-minute argument that the justices looked poised to uphold the ruling. That is a reading of the hearing, not a decision. The court can still affirm, reverse or change the award.

Why should Inventor teams care about a chemical formula case?

Because the method transfers directly to design data. Delaware's trade secret law, like the federal Defend Trade Secrets Act, protects formulas, compilations and other technical information that has value because it is not generally known and is kept reasonably secret. Our article on 3D model files as trade secrets shows that courts already treat CAD models this way, and our guide to trade secrets in manufacturing explains what usually qualifies.
In an Inventor shop, the formulas are your parametric part families, assemblies, iLogic rules, drawing templates, Content Center libraries, bills of materials, setup sheets, test results and supplier data. If a departing engineer takes them, the question "what did the competitor save?" turns into "how many engineering hours, prototypes and test cycles would it take to rebuild this design?" If you cannot answer that with records, an avoided-cost claim is much harder to prove.
The opinion also gives two less obvious lessons. First, compilations count: the court treated years of organised labels, safety data sheets and technical data sheets as a trade secret, because building them took effort, even though each sheet on its own was routine. A curated library of standard parts, drawing styles or validated materials can be the same. Second, photos count: the nephews' pictures of equipment, processes and layout were a trade secret, because a competitor can set up a facility without paying for the design work. That applies to fixtures, jigs and shop-floor layouts designed in Inventor and Factory Design Utilities.
What the court protectedInventor and Vault equivalentWhat to keep as evidence
1,051 formula sheets and the compilation of themPart and assembly models, iParts and iAssemblies, iLogic rulesVault version history, engineering hours per design, change orders
Product labels, safety and technical data sheetsDrawing templates, Content Center libraries, standard parts, material librariesWho built them, when, and how long the library took
Sales data, supplier data, QC data sheetsBOMs, supplier drawings, inspection plans, test resultsAccess lists and which projects each person needs
Photos of equipment, processes and layoutFixture and jig designs, Factory Design Utilities layouts, setup sheetsPhoto rules, visitor logs, restricted project folders
Restricted-access Chempax systemVault with role-based access and project-level permissionsRole definitions, access reviews, download and check-out logs

Which protection measures did the court accept?

A trade secret only exists if the owner made reasonable efforts to keep it secret. The court found that the company did, listing employee training, access restrictions, a secure IT environment, shredding of documents after use, keycard-controlled gates and a ban on photography on site. Formulas and spreadsheets sat in a restricted-access system, and the defendants took information from restricted folders they had credentials for. The court was clear that the measures "need not be impenetrable". They have to be reasonable for the size and type of business.
That is good news for small and mid-sized manufacturers. You do not need a defence-grade setup to protect your designs in court, but you do need visible, consistent basics: training, role-based access, confidentiality terms and records. Our guide to protecting trade secrets in manufacturing covers the full list, and what NDAs can and cannot do for CAD files explains why contracts alone are not enough.
Proof of what your team built, and when.

BORIS for Autodesk Inventor registers your CAD files from inside Inventor and gives each registered version a blockchain timestamp and a certificate of ownership. If design data ever leaves with someone, you can show which version existed and when, without sending your models to a cloud service.

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Where do the warning signs show up in an engineering office?

Almost every step in this case left a trace that could have been seen earlier: about ten days between the termination notice and the last day, thousands of downloads before the resignations, a forwarding rule only one administrator knew about, and refused separation agreements. In an Inventor environment, the same signals look like this: a user who suddenly checks out or copies whole projects from Vault, large exports to USB drives or personal cloud folders, a new mail forwarding rule or a change made by an administrator without a ticket, and an engineer who resigns and declines to confirm in writing that design data stays with the company. Our guides on tracking who accesses your CAD files and tracking design changes and access in Inventor show where to look.
Recent cases point the same way. In the Jingdiao case in China a departing engineer took more than 37,000 drawings and documents, and in the NASCAR trade secrets dispute the evidence centred on a laptop and personal cloud storage. Departures are when most design data leaves.

What should Inventor teams do now?

  1. Name your trade secrets. List the models, assemblies, rules, templates, libraries, BOMs and test data that give you an edge, and mark them as confidential in Vault and in your contracts.
  2. Record the effort behind them. Keep engineering hours, versions, iterations, prototypes and test cycles per product. That is the evidence an avoided-cost claim needs.
  3. Restrict access by role. Nobody needs every project. Review Vault permissions at least twice a year and after every role change.
  4. Watch bulk copies. Alert on mass check-outs, large exports, USB copies and uploads to personal cloud storage.
  5. Check mail rules and admin changes. Forwarding rules to outside addresses and unticketed administrator changes should be reviewed, not trusted.
  6. Plan departures. Revoke access as soon as an exit is known, collect devices, offer a separation agreement with confidentiality terms and treat a refusal as a reason to look closer.
  7. Guard the shop floor. Set photo rules for machines, fixtures and layouts, and keep those designs in restricted projects.
  8. Keep dated proof. Register key design versions with BORIS so their existence and date can be shown independently of any one workstation or server.
For more background, read how to prove company ownership of employee designs, who has to prove what in IP cases and what CAD data breaches really cost. If contractors work on your designs, see how to manage contractor access to CAD files.

Does this mean every design leak is worth millions?

No. The award in this case rested on strong evidence: forensic reports of the downloads, credible testimony about years of development work, an expert who kept his assumptions conservative, and defendants who lost credibility by destroying evidence. The court also found wilful and malicious conduct, which is what doubled the total through exemplary damages. A case with weaker records, a narrower set of files or an honest mistake would look very different.
Courts can also award lost profits, a reasonable royalty or an injunction instead, and in the EU the Trade Secrets Directive lets courts consider unfair profits or a licence-fee-based sum. What carries over everywhere is the need to show that the information was secret, that you protected it and what it was worth. Our article on blockchain timestamps for design authorship explains how dated proof fits into that.

The bigger picture

This week's news on our sister sites shows the same pressure on design data from three directions.
CADChain explains how its CAD data protection technology works across CAD systems, and our article on the Clop PLM data leak shows what happens when engineering drawings end up online.

Conclusion

Arxada v. Harvey is a chemicals case, but its logic fits every engineering business: when know-how is taken, the court may ask what it would have cost to build it again. Here that question produced $24.2 million in avoided costs, and the Delaware Supreme Court is now deciding whether the estimate holds. For Inventor teams the work starts long before any dispute: know which designs are your trade secrets, record the effort behind them, control and log access in Vault, plan every departure and keep dated proof of key versions.
Your designs, your proof.

BORIS for Autodesk Inventor gives every registered file a blockchain timestamp and a certificate of ownership, straight from Inventor.

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FAQ: avoided-cost damages and Inventor design data

What is Arxada v. Harvey about?

A Delaware trade secrets case. The founder of a chemical company that Arxada bought for $450 million and his two nephews took formulas, data sheets, customer data and photos when they left and started a competitor. The Court of Chancery ruled against them on 28 January 2026.

What are avoided costs?

What a defendant saved by using stolen information instead of developing it. Here the court found $24,224,125.59, based on evidence of the years needed to recreate the formulas and an expert estimate of labour costs.

How much do the defendants have to pay?

The Court of Chancery awarded $0.9 million in lost profits and $24,224,125.59 in avoided-cost disgorgement, the same total of $25,124,125.59 as exemplary damages, and attorneys' fees. Law360 put the judgment under appeal at nearly $69.2 million.

Has the Delaware Supreme Court decided the appeal?

Not yet. The appeal was argued on 28 October 2026. Bloomberg Law reported that the justices looked poised to uphold the ruling, but that is a reading of the hearing, not a decision.

Does this case involve CAD files?

No. It involves chemical formulas, data sheets, sales and supplier data and facility photos. The same valuation method can apply to CAD models, drawings and BOMs.

Which protection measures did the court accept as reasonable?

Employee training, access restrictions, a secure IT environment, shredding documents after use, keycard-controlled gates, a ban on on-site photography and a restricted-access system for formulas. The court said the measures need not be impenetrable.

How does BORIS help?

BORIS for Autodesk Inventor registers CAD files with a blockchain timestamp from inside Inventor, so you can show which version of a design existed and when. That supports evidence of ownership and development history. It does not replace access control, contracts or legal advice.