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Zynga Adds Rival Kixeye as Defendant in Trade Secrets Case & Kixeye Countersues

The Zynga saga continues.  In October, Zynga – the company that makes popular Facebook games like FarmVille – filed a lawsuit against a former employee, Allan Patmore.  In short, Zynga alleges that Patmore left the company, took a ton of confidential information and trade secrets with him then went to work for a competitor Kixeye.  Admittedly, I am often skeptical of allegations regarding confidential information and trade secrets.  But, in this case, those allegations seems credible.  Patmore allegedly uploaded some 760 files to his Dropbox account before leaving Zynga.  These files included – among other things – new game designs and data on game monetization.  This is the type of information that really would be valuable to a competitor.

Over the past few weeks, things have gotten even more interesting.  A week ago, Zynga added Kixeye to the lawsuit as a defendant, alleging that Kixeye was in on Patmore’s theft of the company’s trade secrets.  Now, Zynga has fired back.  Just yesterday, Kixeye filed a cross complaint against Zynga.

Kixeye’s argument is essentially as follows:  Zynga is having problems.  It is losing employees.  And in order to stem the tide, it is suing Patmore to send a message: If you leave Zynga and find another job in the industry, we will hunt you down and destroy you.  Beyond that, Zynga is known in the industry for being a predator.  They are trying to kill off competition from smaller, up-and-coming companies.  The lawsuit purely anticompetitive.  And to go a step further, Zynga is trying to use this lawsuit to gain access to OUR confidential information and trade secrets.  Kixeye has taken all of this and rolled it into a claim under California 17200, one of the broadest consumer protection / unfair competition statutes in the country.

Ok.  I tend to be skeptical regarding claims of trade secrets.  I defend non-compete cases.  I have done a good deal of plaintiff-side antitrust work.  I am for the little guy.  I despise big companies that engage in anticompetitive practices.  But I am simply not buying what Kixeye is selling.  Given the facts alleged in the complaint, it is difficult to argue that Zynga’s case is an outright sham, filed solely to squash competition.
I am not a California lawyer.  I am not sure exactly how this works out on the law in a California state court.  But analytically, it seems like we can evaluate this according to the same framework as sham litigation, which often comes up in patent infringement cases.

During my time at Boies, Schiller, I was heavily involved in a case between a consumer products company called First Quality and their much bigger rival Kimberly Clark.  Kimberly Clark sued First Quality for patent infringement.  First Quality counterclaimed for antitrust, alleging that the patents asserted in the litigation were invalid and that the lawsuits were sham litigation, filed solely for the purposes of injuring a competitor and harming competition.  Different ballgame but obvious parallels.  I think the same test for sham litigation should apply to the Zynga case.  See, e.g., Professional Real Estate Investors v. Columbia Pictures Industries, 508 U.S. 49, 61 (1993).

To prove sham litigation, Kixeye will have to establish that Zynga knew or should have known that its claims were baseless at the time of filing.   But here’s the wrinkle:  We’re not necessarily talking about the claims against Patmore.  We’re talking only about the claims against Kixeye.  Let me explain:

It’s pretty clear that the underlying claims against Patmore are not sham litigation.   There’s definitely a good faith claim there for misappropriation and more.  So Kixeye would be fighting a losing battle if they tried to paint the whole Zynga lawsuit as sham litigation.

Kixeye is in a much stronger position if it argues that the claims against Kixeye are a sham.  In other words, the alleged violation of California 17200 could be based solely upon Zynga dragging Kixeye into the lawsuit.  Perhaps the facts did not justify that step.  Perhaps there is no evidence whatsoever that Kixeye had anything to do with Patmore’s misappropriation of Zynga’s trade secrets.  That puts Kixeye’s counterclaim on much stronger (though still somewhat shaky) footing.

One last note: I was surprised to see that Kixeye is represented by Goodwin Proctor.  The cross complaint is filled with over-the-top, dramatic rhetoric.   Beyond that, it is somewhat sloppily done.  For instance, it mentions numerous lawsuits that have recently been filed against Zynga for copyright infringement.  Instead of actually citing to those cases in any standard format (i.e. party, case number, court, date), the cross-complaint just mentions the lawsuits and cites to blogs and tech magazines that have – likewise – mentioned those lawsuits.  That’s just being lazy.  Perhaps most glaring, the cross-claim makes the bold assertion that Zynga is really just using this case as an attempt to gain access to Kixeye’s trade secrets.  Nowhere in the cross-complaint does Kixeye provide any explanation for how this would happen.  There is no suggestion that Kixeye will be forced (or even could be forced) to turn over its own confidential materials.

The case is Zynga Inc. v. Alan Patmore, CGC-12-525099, Superior Court of the State of California.

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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