Credit Suisse Group AG sued one of its former researchers, David Trainer, accusing him of stealing its method for valuing companies and trying to patent it.
Trainer left Credit Suisse in October 2000 and started a research company using bank information in violation of his severance agreement, for which he was paid $168,333, according to the complaint filed yesterday in federal court in Manhattan.
Trainer is also trying to patent a valuation model that covers methods he learned at Credit Suisse that are now part of its Valuesearch product, the Zurich-based bank said.
“Trainer has made it clear that, if the patent is granted, he will attempt to use it to block Credit Suisse from using its own valuation models -- models that Trainer wrongfully misappropriated and now seeks to pass off as his own,” Credit Suisse said in the complaint.
The bank asked the court to block Trainer from using or disclosing its information and from pursuing the patent. It also seeks all revenue and profits of his company and unspecified money damages.
Trainer, founder of the equity-research company New Constructs LLC near Nashville, Tennessee, responded today in the following e-mail statement:
Trainer’s Statement
“New Constructs is an independent research firm that specializes in extracting actionable financial data directly from SEC filing footnotes. For the last eight years, our business has been squarely focused on giving investors full transparency into the details of option grants, off-balance sheet financing, write-downs, reserves and pension obligations that large corporations and Wall Street banks bury in these footnotes.
“Because we shine a spotlight on financial details that large corporations and Wall Street banks try to gloss over, we deliver a very valuable service to investors and pose a serious threat to the status quo in investment underwriting and financial reporting. This case is much more about Wall Street attempting to take advantage of Main Street by controlling the free flow of information than it is about decade-old intellectual property.”
Trainer was at Credit Suisse for four years, and was fired as part of a workforce reduction, according to the complaint. He started in the equity-research department, where he learned a model originally called Value Dynamics Framework and then renamed CSFB Edge.
Valuesearch’s Advantages
Credit Suisse said Valuesearch gives it an advantage over competitors’ price/earnings analysis because “it allows investors to selectively focus on more reliable market data and remove data less relevant to investors’ concerns.”
The bank said Trainer violated his confidentiality agreement and “has engaged in the worst sort of trade-secret misappropriation and unfair competition.”
Credit Suisse said it learned “by chance” of the patent application in late 2008. Trainer’s patent counsel gave the bank a CD “containing a vast quantity of Credit Suisse confidential and proprietary electronic documents,” some stamped with the Credit Suisse label marked “for internal-use only.” The counsel said the material wasn’t misappropriated or proprietary, according to Credit Suisse.
The case is Credit Suisse Securities (USA) LLC v. David Trainer and New Constructs LLC, 09-cv-10253, U.S. District Court, Southern District of New York (Manhattan).
