It's No Game When Protecting Trade Secrets

[author: Melissa A. Silver, XpertHR Legal Editor]

This past October, Zynga, Inc. (Zynga) filed a complaint against a former employee, Alan Patmore, for misappropriation of trade secrets and breach of written contract. Zynga, Inc. v. Patmore, Docket No.: CGC-12-525099. Zynga is responsible for several free-to-play online games known to Facebook users, including FarmVille, CityVille and Words With Friends.

While employed as the General Manager for CityVille (which according to Zynga had more than 100-million monthly active users around the globe at its peak), Patmore had access to Zynga's confidential, proprietary and trade secret information. Accordingly, Zynga required as a condition of Patmore's employment that he execute an Employment Invention Assignment and Confidentiality Agreement (Agreement), agreeing to the following:

That "he understands that [his] employment by the Company creates a relationship of confidence and trust with respect to any information of a confidential or secret nature that may be disclosed...by the Company...and that the Company has taken reasonable measures under the circumstances to protect from unauthorized use or disclosure."
That "the information protected by this agreement ("Proprietary Information") includes among other things, 'game information [including] features, roadmaps, plans, specifications, mechanics, designs, costs, and revenue,' 'techniques and methods to create 'virality', 'measurement techniques, and specific functionality that increases monetization and both measures and increase retention metrics, 'non-public financial information, which may include revenues, profits, margins, forecasts, budgets and other financial data,' 'marketing and advertising plans, strategies,' 'research and development plans,' and 'employment and personnel information.'"
That he would "[a]t all times both during [his] employment and after its termination...keep and hold such Proprietary Information without the prior consent of the Company."
That he would "[u]pon termination of [his] employment with the Company,...promptly deliver to the Company all documents and materials of any nature or form in [his] possession, custody, or control pertaining to [his] work with the Company and, upon Company request, will execute a document confirming [his] Agreement to honor [his] responsibilities contained in this Agreement."

According to the complaint, one day before his departure to work for Kixeye - a competitor of Zynga - Patmore transferred over 700 documents containing Zynga's trade secrets and non-public information from his work computer and backed them up online to his personal account.

The documents transferred included the following: (i) data concerning the unique and proprietary method that Zynga identifies which games and games mechanics will be successful; (ii) more than 10 unreleased game design documents; (iii) confidential Zynga revenue information; (iv) confidential Zynga information regarding employee compensation and performance; and (v) Patmore's entire email box, which contained confidential communications reserved exclusively for Zynga's executive staff.

The court granted Zynga's request for a temporary restraining order to prevent Patmore from:

"Obtaining, accessing, using, retaining or disclosing to anyone (other than his counsel of record and forensic experts), any of Zynga's data, documents and property taken from or belonging to Zynga that is in his current possession, custody or control."
"Accessing, retrieving, copying, transmitting or disseminating any copies of Zynga's data, documents, or property taken from or belonging to Zynga."
"Engaging in any activities relating to the planning, design or development of online game applications that in any way involve the use or disclose of Zynga's trade secrets or other confidential or proprietary data."

Zynga subsequently amended its complaint and added Patmore's new employer Kixeye as a defendant. Kixeye responded with "guns blazing" and filed a cross-complaint against Zynga for unfair competition in violation of California's Unfair Competition Law, California Business & Professions Code § 17200, et seq.

Specifically, in its cross-complaint, Kixeye alleged facts distinguishing itself from Zynga in the online gaming market to demonstrate that Zynga and Kixeye are not direct competitors. Kixeye also attacked the litigation spurred by Zynga claiming this action was nothing more than a desperate attempt by Zynga to obtain access to and steal Kixeye's confidential business information consistent with Zynga's history of copying games of other companies. Kixeye further claimed that Zynga's lawsuit adversely affects Kixeye and other industry competitors from lawfully competing for Zynga's employees and "chills" employee mobility. In other words, it is clear that Kixeye is not going down without a fight.

As we await the result, this case serves as a reminder to employers to safeguard their confidential and proprietary information in order to maintain a competitive edge in their industry. Since no employer is immune from workplace theft, employers should proactively institute measures to reduce exposure to theft of trade secrets, including the following:

Require all employees with access to an employer's confidential and proprietary information to execute an employment agreement, such as a Nondisclosure Agreement;
Tighten language in company policies, which prohibit the theft and unauthorized disclosure or use of an employer's confidential information and trade secrets and highlight the consequences an employee may suffer as a result of such disclosure;
Increase security measures, such as by creating security codes on computer systems;
Monitor employee computer use and disseminate a policy to employees at the commencement of employment so that they are aware of their privacy expectations at the inception of employment;
Remind departing employees of their obligations regarding the employer's confidential and proprietary information; and
Verify that departing employees are not in possession of any confidential, proprietary or nonpublic information prior to their departure.