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California Non-Compete Agreements, Non-Compete Agreements, Technology

Zynga Sues Former Manager Over Theft of CityVille Trade Secrets

In the realm of non-compete and trade secret litigation, there are certain truisms that have stood the test of time.  Among the most basic:  Do not take company files with you.  This is a classic blunder.  You know, like getting involved in a land war in Asia.  It is a bad idea.  When you take company files (i.e. steal them) to use in your next job, it will not go well for you.  You will probably get sued and you will probably lose the case.  In spite of the vast body of evidence that reaffirms this fairly obvious principle, some people think they are so clever that this principle simply does not apply to them.  The case is Zynga Inc. v. Alan Patmore, CGC-12-525099, Superior Court of the State of California.

In October, Zynga – the company that makes popular Facebook games like FarmVille and Bubble Safari– filed a lawsuit against Allan Patmore, a former general manager.  According to the complaint, Patmore stole Zynga’s trade secrets before leaving the company to go work for a competitor.

Through mid-August of this year, Patmore was employed by Zynga as the general manager of its highly popular CityVille game.  That’s right.  Individual Zynga games apparently have their own managers.  On the day prior to Patmore’s departure from the company, he allegedly put his master plan to work.  Patmore selected 760 files from Zynga’s databases, saved those files to a folder on his company laptop and then uploaded those files to DropBox, a cloud storage service.  In an effort to cover his tracks, he then uninstalled the DropBox software from his latop.  What did Patmore take with him?  Apparently, lots of important stuff, like:

  • Data on Zygna’s proprietary method of projecting game success
  • Internal analyses of recent game features on CityVille
  • Historic and future monetization plans for various games
  • The final, green-lit plan for a forthcoming game
  • Background materials for ten additional proposed games
  • Information on effective monetization strategies
  • Information on revenue a finances
  • Strategic roadmaps

And lastly, the pièce de résistance:

  • Patmore’s entire email file

So, in addition to taking all sorts of specific files, Patmore took everything in his email folder going back some fourteen months.   Sure, this obviously includes email correspondence and probably some important or sensitive discussions.  But more significantly, this includes dozens if not hundreds of attachments— on everything: business strategy, acquisition targets, market analysis, sales projections, financials, etc.   Armed with this treasure trove of data, Patmore walked out the door and went to work for a company called Kixeye.  Kixeye is a Zynga competitor and – as rumor has it – there is some bad blood there.  It’s safe to say that Zynga is a top player in the industry.  Kixeye , on the other hand, is ranked 34th.  Kixeye does not have a top 10 game.  Yet.  But with Patmore and his arsenal of Zynga data, there’s no telling what Kixeye could do.

There are, of course, two sides to every story.  But one wonders exactly what Mr. Patmore’s story would be?  First, there is a fact pattern that screams intent and knowledge of wrongdoing.  Patmore did not just take a few lose files.  He did not just email himself a few key documents.  Instead, he took hundreds of files.  He took so many files that saving them to a standard flash drive may not have been an option.  Instead, he had to upload them to a cloud storage service.  And then, in an effort to cover his trail, he deleted the Dropbox software from his corporate laptop.   Let’s state the obvious:  When you take corporate documents and files, it leaves a trail.  Whether you save them to a flash drive, print them, email them or upload them to a cloud, there will be a record.  And in Patmore’s case, that record is a damning one.

A comment about this case and non-compete agreements:  No, this case does not involve a non-compete agreement.   Employee non-competes are unenforceable in California.  But this case nonetheless makes an important point about non-compete agreements:

In many non-compete cases, the plaintiff alleges that its former employee had access to confidential information or trade secrets.  And in most of these cases, I find such allegations are simply not credible.  Plaintiffs go to great lengths to manufacture allegations that somehow implicate information that sounds important and confidential.   Confidential client files!  A PowerPoint for a particular supplier!  A top secret super important strategic company roadmap!  Usually, these types of things are not actually valuable and confidential.   Some people forget that—  if it isn’t valuable to a competitor, then nobody cares.  Courts should do more to push back against flimsy allegations of valuable, confidential information.   And recently, I believe some have done just that.  See, e.g., f IBM v. Visentin, 2011 WL 672025 (S.D.N.Y. Feb. 16, 2011).

At the other end of the spectrum, you have a case like the Zynga case.  Isn’t it interesting.  In the Zynga case, more than in many non-compete cases, it appears that trade secrets and valuable confidential information really are at stake.  Patmore took a ton of materials that he could immediately use at Kixeye to give his new company an unfair advantage.  It is very reasonable to accept the premise that Zynga knows which games work, which games to monetize, how to monetize them, are which new game features are most lucrative.  It is very reasonable to assume that the final, green-lit game plan that Patmore absconded with contains trade secrets that are very valuable.   Again, it is reasonable to assume that Kixeye could evaluate the plans of the ten proposed games and, working with a wealth of Zynga data, come up plans for its own game that would be a blockbuster.  Sure, I defend non-compete cases.  But many (even most) of the plaintiffs in those cases are full of hot air.  Here, by contrast, Zynga really has a legitimate case.  If the allegations are true, Patmore stole a ton of materials that are incredibly valuable to Zynga’s competitors and give those competitors an unfair advantage.

The point is this: Even in a state where employee non-compete agreements are unenforceable, Zynga still has a remedy.   If you’re an employer, and you really do have something that is valuable and proprietary, then you always have a remedy (i.e. misappropriation of trade secrets).  Not that corporate counsel have any interest in moving away from the aggressive use of non-compete agreements—- indeed, it certainly appears to be en vogue these days.  But in my view they could do so without sacrificing the protection of any legitimate interests.   First, there is always the protection of trade secrets.  Second, employers can require employees agree to (1) return any/all confidential information upon separation and (2) agree not to take any such information with them.   If someone takes the information, that’s a breach of contract.  But if they don’t take the information—If the advertising executive or the financial advisor or the news anchor just leave, they don’t take any files with them, and they go work for a competitor that pays them a bit more—–  Does that really implicate any valuable, confidential information?  Does that really implicate a legitimate business interest deserving of protection?  No.  Not in my book.  But in these instances, employers pursue non-compete cases anyway, often for personal vendettas or solely to squash competition.

I prefer the California way.  There is no non-compete here.  But Patmore apparently stole truly valuable, confidential materials and took them with him to a competitor.  That is clearly wrong and unfair.  And even in California, Zynga has a remedy, will get its day in court and will probably win.

Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida.  He focuses his practice on cases involving employment disputes, antitrust and business torts.  He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.

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