Nike has filed a lawsuit in Oregon against three former shoe designers whom Nike alleges conspired to develop for themselves and for Adidas, a strategic blueprint for a creative design studio to compete against Nike.
According to the complaint the three former Nike employees, Denis Dekovic, Marc Dolce and Mark Niner, plotted to establish their own design studio in competition with Nike in violation of their non-compete agreements. More specifically, Nike claims that while still employed by Nike and at Adidas’ request, Dekovic, Dolce and Niner performed work as consultants for Adidas to develop the blueprint for a design studio concept, which according to Nike, was “largely a knockoff of” Nike’s innovation lab – the “kitchen”.
Nike accuses the Defendants of stealing its Confidential Information including Nike’s future strategic development plans, product offerings, and product launches, Nike’s unreleased product design materials, Nike’s unreleased product technology, Nike’s financial product performance information, Nike’s marketing campaign materials, Nike’s virtual testing methodologies and Nike’s blueprints for product launches. The three defendants are also alleged to have tried to unsuccessfully wipe their computers of evidence of their conduct.
The 50-page Complaint paints a fascinating picture composed of egregious conduct. This is an interesting case worth paying attention to because it raises a number of issues that often arise in unfair competition litigation. If the case proceeds through discovery, it will likely provide valuable lessons for both companies and individuals regarding trade secret protection and litigation strategies in cases involving unfair competition. Even at this early stage of the litigation there are valuable insights including the following:
1. Complaint Allegations Can be Damaging. It is not unusual for companies to use the legal system to attempt to thwart competition. One way companies do this is by using a filed complaint to wage public relations warfare. Once the company files the complaint it becomes public record. It is not unusual for news companies and trade publications to publish press releases or articles within a few minutes or hours of learning about the complaint. If the complaint is artfully drafted and describes a parade of horrible acts, press coverage of the complaint may deter customers from doing business with the defendants. Nike’s lawsuit, for example, has garnered much attention because of the egregious nature of the allegations and the fact that people throughout the world are familiar with Nike and Adidas. Regardless of whether the allegations in this case are true or are ever proven to be true, the public’s awareness of the allegations may be damaging to reputation of the defendants and Adidas.
2. Trade Secrets Must be Treated as Secret. Not everything a company claims is a trade secret actually is. For example, under the Georgia Trades Secret Act, for example, a trade secret is defined as any information that (1) is not commonly known or available to the public; (2) has actual or potential economic value to the possessor; and (3) the possessor has made reasonable efforts to keep the information secret. Thus, to qualify as a trade secret the company seeking to safeguard its information must make reasonable efforts to keep the information secret. Certainly, Nike’s efforts to protect its information will be a major focus of the lawsuit. To support its trade secret claim, Nike alleges that it has always heavily invested in efforts to protect its proprietary and trade secret information including the investment of $1.5 million dollars to develop its company-wide security initiative known as “keep it tight”.
Companies seeking to protect its information do not necessarily have to spend millions of dollars to establish that it took reasonable steps to keep the information secret. Here are ten basic (and affordable) measures that a company should consider implementing to protect its information:
1. Segregate trade secrets to be treated differently than other non-sensitive information.
2. Limit access to databases, documents or devices containing sensitive information through the use of passwords.
3. Use employee monitoring software to record and block computer activities.
4. Track who accesses information.
5. Develop, disseminate and train employees on policies concerning the use of company-issued computers and electronic devices.
6. Label sensitive documents as “confidential” or “secret”.
7. Discard and shred printed copies of sensitive documents after use.
8. Prohibit employees from taking confidential information home with them.
9. Conduct exit interviews and discuss with departing employees whether they have returned all company property.
10. Consult promptly with counsel when you are suspicious an employee has taken company information.
3. You Can’t Fool Forensics. Nike claims that the three defendants stole information and then wiped their computers clean in attempt to hide their conduct. This type of claim is not surprising.
The genesis of many trade secret lawsuits is an inspection of the departing employee’s computer. A forensic computer expert can help a company uncover evidence that the employee has improperly accessed, transferred, or copied proprietary information. An important fact that many departing employees do not appreciate is that not only can their computer activity be detected, but deleted files and emails can be recovered. Forensic experts can also determine whether an employee connected a thumb drive or other external devices to the computer.
The defendants in the Nike lawsuit allegedly attempted to cover their tracks, but it is apparent from Nike’s complaint that Nike’s forensic expert uncovered a wealth of evidence incriminating the defendants.
Nike’s response to the defendant’s actions appears to have been a thorough investigation followed by the drafting of a highly detailed complaint. It will be interesting to see how the defendants respond if Nike brings claims against Adidas. This blog will keep you informed as to new developments on this story.