SmartSky Networks Sues Over Trade Secret Misappropriation and Breach of $30m Contract

SmartSky Networks, LLC, a communication network developer, filed a complaint on Thursday in the Middle District of North Carolina against defendants Wireless Systems Solutions, LLC  (WSS) et al. proffering that the defendants misappropriated trade secrets, breached their contract and violated the North Carolina Unfair and Deceptive Trade Practices Act for their alleged misappropriation of the plaintiff’s intellectual property and trade secrets in connection with the parties’ $30 million contract for developing a wireless communication network.

SmartSky claimed that since 2018 it paid Wireless System Solutions, a communications infrastructure company, “over $30 million to develop, build, test and produce components to complete SmartSky’s proprietary, end-to-end, air-to-ground (ATG) wireless communication network for in-flight travelers, airlines, flight crews, and other data users.” According to the plaintiff, “WSS took the money, but failed to perform.” Instead, SmartSky alleged that some of the named defendants “funneled SmartSky intellectual property, equipment, and materials to a family-owned alter ego, DAG (also a defendant in the suit), to build a competing product that they intend to market and sell as their own.” In particular, SmartSky claimed that DAG “claimed that it developed the very ATG network components that SmartSky paid WSS tens of millions of dollars to develop and build, and is actively marketing and offering to sell products based on this claim.” Meanwhile, DAG argued that it independently developed this technology; thus, it allegedly did not rely on SmartSky’s intellectual property, materials, or money. However, the plaintiff asserted that this claim is “disingenuous, implausible, and false.” In sum, SmartSky stated that the parties’ business relationship led to: “WSS receiving over $30 million and access to SmartSky intellectual property”; “DAG using those resources to build itself products while WSS strung SmartSky along with frequent delays”; and “SmartSky left holding the bag.”   

Consequently, Smartsky averred that “WSS failed to perform under the Agreements.” According to the plaintiff, this has pushed back its proposed launch date. Furthermore, SmartSky claimed that either in recognition that the defendant could not fulfill its contractual obligations or in an effort to benefit from the products, “WSS began making unreasonable, extra-contractual demands to excuse and divert attention from its failure to perform and hide ulterior motives.” SmartSky added that without relief, particularly in the form of a permanent injunction, its business “will be irreparably harmed” and the defendants “will have succeeded in going to market with the very technology that SmartSky paid WSS to develop.”

The complaint accuses WSS of 14 different counts, such as trade secret misappropriation in violation of the Federal Defend Trade Secrets Act and the North Carolina Trade Secrets Protection Act, conspiracy to misappropriate trade secrets, breach of contract, unfair and deceptive trade practices, conversion, and other violations.

SmartSky has sought declaratory judgment in its favor, an award for damages, for the defendants “to return all (p)roducts in their possession paid for by or otherwise belonging to SmartSky, and other relief.

SmartSky is represented by Nelson Mullins Riley & Scarborough LLP.