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Recent Settlement of Zynga Misappropriation of Trade Secrets Claim Highlights Importance of Confidentiality and Non-Disclosure Agreements

men-139840_640.jpgGiven the large concentration of technology companies in the Bay Area and the high turnover rate of employees in the start-up and technology business world, trade-secrets theft is a large concern amongst businesses in the Bay Area. Indeed, a recent report and court case reveal that this concern is justified. According to a global survey conducted by the computer security company, Symantec, half of employees who left or lost their jobs in 2012 kept confidential corporate data. Additionally, 40% of the individuals surveyed planned to use the data in their new jobs. Perhaps even more concerning is the fact that only 47% of those surveyed said that their organization took action when employees took sensitive information contrary to public policy.

Additionally, in October 2012, San Francisco-based online social gaming company, Zynga, Inc., sued its former employee, Alan Patmore, accusing him of taking company files when he joined Zynga competitor, Kixeye. More specifically, Zynga alleged that Patmore stored more than 760 documents from his work computer on the cloud storage website site, Dropbox, before his last day. The files taken included documents containing revenue information, monetization for its games, design documents for over 10 unreleased games, and 14 months of confidential emails. In Zynga’s original complaint, the company alleged that the data Patmore took could be used to ultimately improve Kixeye’s market standing. A September 9, 2013 filing at the San Francisco Superior Court revealed that Zynga and Patmore had settled their trade-secrets misappropriation case.

Patmore, who was the general manager of one Zynga’s most popular games, Cityville, before he was poached to become Vice President of product of Kixeye in September 2012, signed a Confidentiality Agreement pursuant to his employment with Zynga. The Confidentiality Agreement obligated him to protect Zynga’s confidential, proprietary, and trade secret information. Following the settlement, Patmore ultimately admitted to stealing trade secrets and issued an apology. Although the commercial terms of the settlement were not disclosed, Zynga had originally asked the court for both damages and injunctive relief, preventing Patmore and others from retaining, possessing, and disclosing any of its confidential and protected data.

Broadly speaking, a trade secret refers to any proprietary or confidential information used by a company that derives independent value from not being generally known to the public or other persons who can gain value from its disclosure or use. According to the California Civil Code, which adopted the Uniform Trade Secrets Act, a trade secret can include a formula, pattern, compilation, program, device, method, technique, or process. In the state of California, an individual who prevails in a trade secret misappropriation case may be able to recover damages for the actual loss caused by the misappropriation and unjust enrichment caused by the unlawful misappropriation.

Employers concerned about protecting their trade secrets should consider implementing the following policies:

• Require all employees, upon termination, to return all company property, including electronic files, to the company;
• Segregate a departing employee from confidential information as soon as you learn of the employee’s intention to leave the company;
• Educate your employees about your company’s specific trade secret policy and the illegality of trade secret theft in general; and
• Require any employee who may be disclosed to company trade secrets or other confidential information to sign a non-disclosure agreement as a condition of employment.

The Law Offices of James G. Schwartz represents businesses in establishing, enforcing and trading on their intellectual property rights. In addition to drafting and enforcing confidentiality and non-agreements in any business context, our law firm also has experience litigating cases involving the misappropriation of trade secrets. Contact a Northern California intellectual property attorney at our Pleasanton office if you need counsel to help you establish your intellectual property rights and enforce your contracts and agreements.

Sources:

Zynga, Samsung, Escobar, Purdue: Intellectual Property, by Victoria Slind-Flor, Bloomberg Businessweek