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Contract Law, Nike, Non-Compete Agreements, Trade Secrets

Three Nike Employees Perpetrate Massive Theft of Trade Secrets then Bolt for Adidas

Nike has sued three former employees who left to work for Adidas. The company is suing for everything imaginable: Breach of contract, theft of trade secrets, fraud, conspiracy and more. In a fifty page Complaint, the athletic apparel giant lays out a host of fairly shocking allegations against a team of three designers who launched a plot to jump ship, steal numerous Nike plans and products and then parlay that into lucrative new careers at Adidas. I see a lot frivolous non-compete and trade secret cases. This one, however, is the real deal. It smacks of greed and unbridled hubris. The Defendants are in serious trouble. Let’s take a look:

Once upon a time, Denis Dekovic, Marc Dolce and Mark Miner all worked for Nike. Dekovic began working for Nike as a Senior Designer in 2005. He was repeatedly promoted, first to Design Director and then Senior Design Director. Eventually, he was responsible for managing Nike’s Global Football Footwear Design division. (A note for us Americans: That means soccer.) This means Dekovic was the most senior member of Nike’s entire, world-wide soccer footwear design team. Dekovic worked with Nike’s executive leadership to plan and produce product innovations, new footwear lines and special products for famous athletes and high-profile events such as the World Cup. In addition, Dekovic had ultimate oversight and authority over a team of designers who designed and developer soccer footwear. This gave Dekovic access not only to design concepts, but also things like new materials and novel manufacturing concepts.

Dolce began working for Nike in October 2005 as a Senior Designer in the Active Life Division. He, too, was promoted. Eventually, Dolce became the Design Director of Nike’s Sportswear Division, which included basketball, American football and cross training. As such, Dolce had oversight and authority over development of footwear for all of these sports. He managed a team of Nike designers who developed basketball shoes for numerous NBA stars including LeBron James, Kobe Bryant and Kevin Durant. At the time of his departure, he was involved in creating updated versions of some of Nike’s best known vintage NFL and NBA shoe designs which were to roll out over the next several years.

Miner began working for Nike in March 2008 as a designer in Nike’s Global Women’s Training category. He, too, was promoted. In 2011, he became a Senior Footwear Designer for Nike Running. In this capacity, he had high-level responsibility for designing Nike running footwear. He was involved in the development of several notable Nike running products include the Nike Free, AirMax and Zoom Air.

Let’s take a step back and recap: At this point, we have three guys who all have a relatively long tenure at Nike. Two of the Defendants have worked at Nike for 9 years. The remaining Defendant has worked there for 6. Their collective experience covers the waterfront: soccer, football, basketball, cross-training, women’s apparel, running. All three of them climbed the corporate ladder and reached a point where we could reasonably assume that they would have access to Nike’s confidential and proprietary information. In light of this, it is neither surprising nor unreasonable that the Defendants signed agreements that contained non-compete and non-disclosure provisions. Those provisions themselves were quite reasonable: a one-year non-compete, a one-year non-solicitation and a two-year non-disclosure.

During their years at Nike, all three of these individuals must have displayed a great amount of talent and intellect—otherwise it’s hard to imagine them reaching such high-level positions within such a major corporation. But it seems that greed and hubris can quickly cancel out other positive qualities like talent and intellect. In April 2014, the Defendants began laying the groundwork for their departure from Nike. Initially, the Defendants imagined launching their own independent creative design studio, essentially an independent, copycat version of Nike’s innovation design lab called “Kitchen.” But in short order, the three musketeers realized the folly of that plan: It would be impossible for them to create an independent studio, unattached to a major athletic apparel company, with no corporate backing. So, the Defendants settled on a new direction: They would attempt to attract a major backer or partner in the athletic apparel industry. Apparently, the first step in this new plan was to acquire a bunch of fake Instagram and Twitter followers. Genius!

It bears noting that Defendants launched this plan while still working for Nike. In May 2014, after an issue with Dekovic’s visa status, Nike paid more than $50,000 to relocate him and his family to Italy, on the understanding that Dekovic planned to remain with the Company long-term. Upon securing Nike’s commitment to fund his relocation to Italy, Dekovic informed Dolce and Milner that the move to Italy would serve their plans well because Italy was one of those “countries where [Nike’s] non-compete is difficult to enforce.”

Also during this same time – beginning in March 2014 and continuing from there forward – the Defendants were engaged in a dialogue with Adidas about possible career moves. By June 2014, all of the Defendants were in talks with a recruiter for Adidas and a member of that company’s executive board. The three Defendants – as a group – pitched Adidas their “design studio concept.” This concept was – essentially – Nike’s “Kitchen” project, just repacked as Defendants’ own idea. Adidas loved the idea and immediately signed the three on as consultants in exchange for the promise of future employment. Coming out of these initial talks, Adidas and the three Defendants branded the project as the Adidas-backed “Brooklyn Creative Design Studio.”
As their relationship with Adidas progressed, the Defendants became somewhat concerned about potential legal ramifications of their actions. In light of this, the Defendants sought assurances from Adidas that Adidas would cover their legal fees in the event of any litigation with Nike arising out of their career move. Although it appears that Adidas never agreed to such terms in writing, it seems that the Defendants received some assurances that made them comfortable moving forward. And move forward they did. In the summer of 2014, all while still employed at Nike, the Defendants began fleshing out the concept for the Brooklyn Creative Design Studio. They mapped out the organizational structure, operational protocols, interplay with the rest of corporate Adidas, location for the actual center and more. They shared all of this with Adidas and began working with Adidas’ Global Creative Director. And things kept going from there: The Defendants – in concert with Adidas – began mapping out budgets, scouting possible space, and designing preliminary plans for the layout of the building.

In late August, everything finally came together: While still at Nike, the Defendants inked lucrative contracts with Adidas. In their final days at Nike and shortly after resigning, the Defendants began a clumsy attempt to steal as much Nike information as possible and then destroy any record of their conduct. At one point, Dekovic pondered removing the hard drive from his laptop and sending it back to Nike with the hard drive missing. Ultimately, he decided against that plan. Instead, Dekovic copied all of laptop’s contents onto an external hard drive, then damaged the laptop to a point he thought would render it inoperable and shipped it back to Nike. Dolce sent an email to his personal email address containing a zip file with design drawings for an unreleased shoe tied to a prominent, Nike-sponsored athlete. Unlike in many cases where the Plaintiff offers vague allegations about confidential information and trade secrets, the materials at issue in this case are certainly confidential and likely trade secrets. Between their collective efforts, the Defendants walked away from Nike with a treasure trove of information, including:

  • High-level strategic development plans for the next 3 to 4 years. These plans included proposed and prospective product offerings and the timing of releases.
  • Unreleased product design materials for the next 2 to 3 years. This included models, sketches and designs for soccer footwear and other soccer related products (e.g. team uniforms). These design plans included very detailed information on fabrics, cuts, colors, manufacturing and more.
  • Financial data including both a historical breakdown of all Nike footwear sales by product for the past year and a forward looking projection of growth my product for the next twelve to eighteen months.
  • Documents regarding Nike’s product marketing strategies including documents on product promotions, in-store presentations, pr campaigns, product launches, plans for specific sponsored athletes and plans for specific Nike-sponsored sports teams.

This is a good sample of what the Defendants took. At this point, the Defendants deleted – or attempted to delete – any electronic record of their activities. They deleted emails and text messages from their phones and reset their phones to factory settings. They deleted everything from their laptops. And Dekovic, as previously mentioned, damaged his laptop to a point where he believed any data on the computer would be entirely inaccessible.

And as if this was not enough, Dekovic had one more project in the works: Long before leaving Nike or partnering with Adidas, Dekovic had copied some vintage Nike footwear designs and began work on launching his own shoe called the Moonwalker. Dekovic intended to do this entirely outside of Nike: He had gotten outside investors, developed designs, drawings and sales projections and even lined up retailers to carry the shoes. Neither Nike nor Adidas were ever aware of this side project.
This brings us to today: Nike is – of course – suing Dekovic, Dolce and Miner for every claim imaginable, and rightfully so. In many cases, especially many non-compete and trade secret cases, there is another side to the story. In many cases, the Complaint talks vaguely about wrongful conduct, confidential information and trade secrets, but never really gives specifics. The instant case is much different. Nike’s complaint is filled with specific, credible and highly damaging allegations. Bottom line: I do not think there’s anything the Defendants can say to explain their conduct.

The Takeaways:

(1) The Electronic Paper Trail: For some reason, even though it is almost 2015, people like the Defendants have absolutely no understanding of technology. Today, every electronic transaction leaves a record. Every time you print a document, download a file, transfer something to a flash drive or send yourself an email— that leaves a record. What the Defendants did was not only wrong, it was also entirely stupid.

(2) Adidas: Where is Adidas in all of this?

  • It is somewhat surprising that Nike has not sued Adidas for tortious interference. The Complaint demands $10 million—and on these facts, Nike could possibly get much more in the form of punitive damages. There is no way that the Defendants have the assets to satisfy that sort of judgment. But Adidas does. And Adidas may have some exposure here depending on exactly what it knew. Nike may be deferring a decision on whether or not to sue Adidas until seeing what comes out in discovery.
  • There’s also the issue of indemnification. Did Adidas indemnify the Defendants? If so, what is the scope of that indemnification? I doubt a company as sophisticated as Adidas would have agreed to indemnify the Defendants against the type of claims asserted in this lawsuit.

The case is Nike vs. Dekovic et. al., Case No. 14-CV-18876, Multnomah County, OR, December 8, 2014.

Jonathan Pollard is a trial lawyer and litigator based on Fort Lauderdale, Florida. He focuses his practice on defending non-compete and trade secret claims. Jonathan routinely represents doctors, corporate executives and other high level employees who are switching companies, or, who have started their own ventures. Beyond litigation, Jonathan advises employees, companies and business owners regarding restrictive covenant issues in connection with employment contracts, separation agreements, hiring decisions, the purchase or sale of business interests and the execution of commercial leases. Jonathan has been interviewed about non-compete issues by reporters from INC Magazine, the BBC, the National Federation of Independent Business and The Tampa Bay Times. In addition to his background in non-compete and trade secrets work, Jonathan has broad experience as a competition lawyer, generally, and has litigated numerous cases under both the Sherman and Lanham Acts. He is licensed in all Florida federal and state courts and routinely represents clients in Miami, Fort Lauderdale, West Palm Beach, Fort Myers, Tampa, Orlando and Jacksonville. His office can be reached at 954-332-2380. For more information, visit http://www.pollardllc.com.

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