Growing Small Satellite Market Spawning Litigation

Virgin Galactic expanded and continued its attack on its former VP of Propulsion, Thomas Markusic, and his new company, Firefly Space Systems, this month. Markusic co-founded Firefly around the time he left Virgin Galactic, and the two companies compete in the market for rockets capable of launching small and medium sized satellites into lower earth orbit. As the demand for services from such satellites increases steadily; the race to provide a more cost effective method for delivering those satellites into space is also growing and becoming more competitive.

According to Virgin Galactic’s complaint and other court documents, Virgin Galactic has already landed several blows against Markusic as part of an arbitration alleging that Markusic breached his employment agreement by stealing and using Virgin Galactic’s confidential trade secret information to create Firefly and solicit investors and customers. During that proceeding, the arbitrator determined that Markusic destroyed evidence by reformatting or physically destroying storage devices that had been connected to Markusic’s Virgin Galactic computer. Destroying such evidence is never a good idea because it often leads to sanctions that are equally—if not more—damaging than the destroyed evidence. This case was no exception, and the arbitrator ultimately issued terminating sanctions striking Markusic’s answer and counterclaims as a result.

Virgin Galactic filed its subsequent lawsuit against Firefly and Firefly’s other two co-founders (Michael Blum and P.J. King), neither of whom were parties to the arbitration proceedings with Markusic. Virgin Galactic alleges that Markusic, Blum, and King founded Firefly while Markusic was still employed at Virgin Galactic, and used Virgin Galactic proprietary information to solicit investors and customers and to build Firefly’s technology. Virgin Galactic seeks a temporary restraining order, preliminary injunction, and permanent injunction forcing Firefly to return the allegedly stolen confidential trade secret information along with any profits or proceeds obtained using the information.

While we will continue to monitor this case, it may not last long. Earlier this month, Firefly laid off its staff of 159 employees. The company explained that one of its larger investors backed out of the company’s Series A financing leaving Firefly with approximately half the amount of money it intended to raise.