In Da (Trade Secrets Theft) Club: $15 Million Judgment Against Rapper 50 Cent

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http://blogs.orrick.com/trade-secrets-watch/files/2014/04/shutterstock_129690275-200x150.jpgThe rapper known as “50 Cent” stole trade secrets to the tune of $15 million, an arbitrator found.

A filing in the U.S. District Court for the Southern District of Florida earlier this month disclosed the final award for theft of trade secrets relating to a headphone design from an audio company 50 Cent had helped finance.

While the decision grabbed mainstream news media headlines, the arbitrator’s legal findings are also newsworthy to the avid trade secrets practitioner:  The arbitrator relied on the inevitable disclosure doctrine and the similarity of products as evidence of liability.

The dispute began when 50 Cent—best known for the song “In da Club,” and whose real name is Curtis J. Jackson III—became interested in producing a line of over-the-ear headphones branded with his name, after witnessing the success of fellow rapper Dr. Dre’s line of “Beats by Dre” headphones.   The rapper contributed more than $1 million to Sleek Audio to design and produce a line of “Sleek by 50” over-the-ear headphones.  After months of research, Sleek Audio created a unique design for the “Sleek by 50” line of headphones, but it did not have the resources to produce them.  The rapper then began working with another company, SMS Audio, to produce a line of self-branded over-the-ear headphones called “Synch by 50” and “Street by 50.”

To design the “Synch by 50” and “Street by 50” headphones, 50 Cent personally selected and hired the same Sleek Audio designers of the Sleek by 50 headsets.  (The final award filing did not explain what relationship the headphone designers had with Sleek at the time 50 Cent hired them.)  After Sleek discovered that the SMS headphones bore a design identical to its “Sleek by 50” headphones, it sued 50 Cent for a number of causes of action, including trade secret misappropriation.

There was scant evidence that anyone downloaded information or had otherwise run off with documents, as in the classic trade secrets dispute.  Rather, in finding that 50 Cent misappropriated trade secrets, the arbitrator compared the Sleek by 50 and Street by 50 headphones and observed that they had a “multitude of mechanical design details” in common.  The arbitrator concluded the “likelihood of such an overlap of features and design details to be arrived at independently by two design groups is infinitesimally small.”

Interestingly, the arbitrator also relied on the inevitable disclosure doctrine to make a finding of actual misappropriation.  The inevitable disclosure doctrine is most often cited to support an injunction to prevent an “inevitable disclosure” of trade secrets in the future, not liability or damages for past actions.  Nevertheless, the arbitrator determined that when SMS, at 50 Cent’s direction, hired the same designers who had developed the “Sleek by 50” to design a similar product for SMS, those employees would inevitably rely on Sleek’s trade secrets and incorporate them into the SMS headphones and, therefore, must have done so.

Topics:  Music, Patent Litigation, Patents, Theft, Trade Secrets

Published In: Alternative Dispute Resolution (ADR) Updates, Art, Entertainment & Sports Updates, Civil Remedies Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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