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Broker Genius, Inc., a company that develops software for the ticket
broker industry, has sued its former licensees defendants Nathan Zalta and
Michael Shamah, and their company, NRZ Entertainment LLC alleging that
they used their access to Broker Geniuss AutoPricer v.3 software improperly
to acquire the knowledge and information they needed to build a copycat
competitor product called TickPricer. Broker Genius alleges that, in doing so,
defendants misappropriated Broker Geniuss trade secrets, engaged in
copyright infringement, breached their contractual obligations and the
implied duty of good faith and fair dealing, unjustly enriched themselves,
and tortiously interfered with Broker Geniuss current and prospective
business relations. (See Compl., ECF No. 1.) Plaintiff later joined two
additional defendants software developer Joseph Bassil and his company,
Gontham, LLC and alleges that they are also liable for trade secret
misappropriation, copyright infringement, and unjust enrichment for their
roles in helping Zalta, Shamah, and NRZ build TickPricer. (Am. Compl., ECF
No. 25.)
pursuant to New York law and the Defend Trade Secrets Act of 2016
(DTSA), 18 U.S.C. 1836, et seq. (Pl.s PreHearing Mem. 17 n.25.)
I. PROCEDURAL BACKGROUND
At the same time that Broker Genius filed its complaint on March 23,
2017, it requested that the Court issue an ex parte temporary restraining order
to, inter alia, seize any property of defendants NRZ, Zalta, and Shamah
containing Broker Geniuss trade secrets and to restrain them from marketing
their TickPricer software product. The Court denied plaintiffs request for ex
parte relief, held a hearing later that same day with counsel for all sides
present, and granted a TRO directing defendants not to access or disclose
Broker Geniuss proprietary technology or information, not to violate any
confidentiality obligations owed to Broker Genius, and not to destroy
evidence, but the Court denied Broker Geniuss requests to seize defendants
computers and prevent defendants from marketing the TickPricer product.
(See Order to Show Cause, ECF No. 5.)
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secondary markets. The secondary market for tickets for sporting events,
concerts, and theater performances is a multibillion dollar industry in which
ticket brokers purchase tickets from ticket sellers (e.g., Ticketmaster) in the
primary market and then resell to consumers through online exchanges (e.g.,
StubHub). (Prelim. Inj. Hrg Tr. (Tr.) 223:2324; see also U.S. Patent
Application Publication No. US 2015/0025918 A1, DX1 39.)
Sherman and plaintiffs expert, Dr. Eric Koskinen, testified that because
Broker Genius was creating a type of product that did not already exist in the
marketplace, it spent considerable time creating its own roadmap for the
functions the software should perform and refining its user interface through
trial and error and responses to customer feedback. (Tr. 112:1124, 114:318,
189:19190:8.) Accordingly, Broker Genius created multiple iterations of its
product over the course of two years; it released the first version in
September 2013 and did not launch the version at issue in this case
AutoPricer v.3 until July 2015. (Koskinen Expert Report, PX62 5.2.1; see
also Deposition of Sam Sherman, May 19, 2017, Pl.s PreHearing Mem., PX
84; Tr. 66:914.) This development process necessitated an investment of over
$4 million. (Tr. 199:35.)
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was published on January 22, 2015 as Pub. No. US 2015/0025918 A1 (the 918
Patent Application). The 918 Patent Application describes a comprehensive
system to automate the entire ticket management process from
forecasting market trends and purchasing event tickets to pricing the tickets
for sale through various marketplaces. (918 Patent Application, DX1 22.)
A major portion of the system described in the application has a functionality
which enables brokers to manage all of their electronic tickets from one
interface, automatically change the prices of tickets based on
predetermined user inputs, and upload[ ] [their] ticket listings seamlessly
to multiple secondary ticket exchange servers and integrat[e] with them in
real time. (DX1 22, 33.) This is the same functionality that is found in
AutoPricer v.3 the software at issue in this case.
1Broker Genius also considers the AutoPricer v.3 source code to be a trade secret (see Am.
Compl. 21), but it concedes that there is no evidence that defendants misappropriated
or even accessed that source code (Tr. 105:22106:1).
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Broker Genius claims that the trade secrets of AutoPricer v.3 are not
limited to its backend structures, but also include the softwares userfacing
UX/UI (SC003). At the preliminary injunction hearing, Dr. Koskinen
explained that UX/UI encompasses three general concepts: the design of the
cosmetic graphical elements of a software program, the sequence of
workflows and the processes by which users interact with that software, and
the impressions and attitudes that a user has when interacting with that
software. (Tr. 101:19102:13.) The UX/UI of AutoPricer v.3 contains a
collection of widgets interactive elements that accept various forms of
inputs from users, perform calculations, and present the results back to the
users. (Tr. 100:19101:5.) Broker Genius contends that it made deliberate
design choices to ensure that these widgets appear and interact with each
other in a way that the ticket brokers who use AutoPricer would find
intuitive and helpful to achieving their objectives in reviewing inventory and
pricing tickets.
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Broker Geniuss witnesses also testified that the company only grants
this extensive access to its trade secrets to customers who have agreed to
restrictions on their use of the software. Anyone who wishes to sign up for a
license to use Broker Genius must first create a passwordprotected account
and click on a box to assent to Broker Geniuss terms of use a phrase that
appears as a hyperlink and links to a copy of the Terms of Use document.
(Tr. 122:612.) These Terms of Use govern all users who use AutoPricer v.3
for a 30day trial period. (Tr. 222:57.) Sherman explained that once a
customer agrees to the Terms of Use, that means theyve signed up and we
would give them as many training sessions as they want at that point. (Tr.
463:1618.)
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The written Terms of Use require users to agree not to [m]odify, adapt,
sublicense, translate, sell, reverse engineer, decompile or disassemble any
portion of the Site or Apps or otherwise attempt to derive any source code or
underlying ideas or algorithms of any part of the Site or Apps. (Terms of
Use, updated June 12, 2014, PX56 at 3.) In addition, users must agree not to
[r]eproduce, modify, display, publicly perform, distribute or create
derivative works of the Site or Apps or Content. (Id. at 4.)
Broker Genius users who wish to subscribe to longer term contracts have
the opportunity to sign the Broker Genius Service Agreement (Service
Agreement). (Tr. 222:79, 460:1924.) But because the Service Agreement is
not used by those Broker Genius customers who license the AutoPricer
software on a monthtomonth basis, the majority of Broker Genius customers
approximately sixty percent are covered solely by the Terms of Use. (Tr.
460:19462:20.)
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NRZs employees first heard about Broker Genius in May 2015 and
reached out to Broker Genius to learn more about automatic ticket pricing
and to receive a demonstration of AutoPricer v.3. (Tr. 487:715, 488:2125.)
Shamah promptly signed NRZ up for a 30day trial of Broker Geniuss full
service subscription model. (Tr. 492:1922.) In the process of creating an
account, he or another NRZ representative assented to Broker Geniuss Terms
of Use.3 (Broker Genius Client Account Creation Dates, PX92 at 9.)
Upon the expiration of its second trial period, NRZ did not become a
full service customer. Instead, at the end of December 2015, NRZ entered
into a trial subscription for Broker Geniuss alternative selfservice offering,
under which instead of relying on a Broker Genius representative to price
its tickets NRZ would use the AutoPricer v.3 technology to price its own
inventory. (Tr. 505:21506:4.) After the conclusion of this 30day trial period,
NRZ agreed to enter into a full license to use the AutoPricer v.3 product for a
oneyear term commencing on February 3, 2016. Shamah signed the Service
Agreement on behalf of NRZ on February 22, 2016. (See PX8.)
3 Although Shamah and Zalta both testified that they could not recall clicking on or
otherwise assenting to the Terms of Use (Tr. 492:2325, 534:612, 536:1624, 537:45
(Shamah), 631:1822 (Zalta)), Broker Geniuss records show that an account was
created in Shamahs name on May 12, 2015 (PX92 at 9), and defendants have not
disputed plaintiffs assertion that a user cannot create a Broker Genius account without
first clicking on a box to assent to the Terms of Use.
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(Tr. 37:315; Tr. 508:413.) Ellman then continuously discussed the service
with Shamah during the course of NRZs trial and license subscriptions. (Tr.
35:824.) According to Ellman, it was standard practice for Broker Genius to
provide continuous training support, but the training he provided to NRZ
was definitely on the more excessive end of what is typical for Broker
Genius customers. (Tr. 36:1522.)
At the same time that NRZ was using AutoPricer v.3 and receiving
Broker Geniuss support and training in using its software, NRZ began to
develop its own automatic ticket pricing product: TickPricer. Although there
is no evidence that NRZ accessed Broker Geniuss source code, it is also
abundantly clear from the documentary evidence and witness testimony that
defendants closely modeled TickPricer on AutoPricer v.3 and relied heavily
on their knowledge of Broker Geniuss product to build their own software.
Shamah testified that the reason that NRZ decided to create TickPricer
in the first place was that he and Zalta wanted to improve on a concept that
they believed had great potential but was being poorly executed by Broker
Genius. (Tr. 520:2223.) Shamah testified that by June 2016, NRZ was losing
money using AutoPricer v.3 as a result of bugs that led NRZs tickets to be
priced against comps that improperly included NRZs own inventory.
According to Shamah, this created a situation in which NRZ was essentially
competing against itself in a race to the bottom. (Tr. 514:13516:11, 518:29;
Email from Shamah to Ellman, June 20, 2016, DX57; accord Tr. 577:25579:3
(Zalta testifying that he was also familiar with bugs in the Broker Genius
software).)
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Although NRZ did not hire Saqib to create its software based on Broker
Geniuss product in June (Tr. 580:22581:5), two months later, Zalta went to
UpWork.com a platform linking freelancers to software development
projects and posted a job seeking a developer to build an automatic ticket
pricing software (UpWork Posting, DX41). Defendant Joseph Bassil, a
developer who builds automation software through his company Gontham
LLC, responded to Zalta on August 11, 2016. (UpWork Correspondence
between Zalta and Bassil, DX40 at NRZ_000047.) As soon as Bassil
responded to Zaltas posting of the job, Zalta sent Bassil a ninepage PDF
document entitled Pricing Tool Directions, to detail the requirements for
the software he wanted developed and to confirm that Bassil would be able
to 100% complete this project perfectly according to specifications. (DX40
at NRZ_000047; Pricing Tool Directions, DX70.) Like the PDF document that
Zalta had sent to Saqib several months earlier, this document included
detailed annotated screenshots taken directly from plaintiffs AutoPricer v.3.
Specifically, the 9page document that Zalta sent to Bassil contained four
pages of screenshots of the AutoPricer v.3 user interface, with annotations
identifying various features and functionalities that were [n]eeded in [the]
[p]ricing [s]oftware that Bassil was being asked to develop. (DX70 at
NRZ_000106; see also id. at NRZ_00010508.) It also contained two pages of
annotated screenshots of the SkyBox POS the publicly available
application programming interface (API) from which a broker would pull
their inventory as well as two pages of annotated screenshots of a sample
StubHub event page. (Id. at NRZ_000101104.) Notably, the PDF did not
contain any explicit references to Broker Genius or its proprietary products.
Zalta merely identified the screenshots of AutoPricer v.3 as having been
taken from an unnamed sample pricing software. (Id. at NRZ_000108.) In
addition, before Zalta sent the screenshots to Bassil, he went to the trouble of
redacting Broker Geniuss client support telephone number from the last
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screenshot in the PDF, thereby hiding the screenshots source. (See Letter
from Jason Cooper to the Court, July 11, 2017, ECF No. 90 at 1.)
Zalta testified that the reason he sent this PDF to Bassil was to show Bassil
who had no experience in the ticket broker industry that all the
information that needed to be pulled for this software was to come from two
places: SkyBox and StubHub. (Tr. 587:1116; see also Tr. 634:24635:5.) The
Court does not credit that testimony; rather, Zalta sent Bassil the AutoPricer v.3
screenshots in order to have Bassil copy AutoPricers functionalities.
NRZ hired Bassil for the development job on August 16, 2016, five days
after he had responded to Zaltas job posting. (DX40 at NRZ0004748.) Bassil
went on to build TickPricer in merely four months, even though he was
working on this project only parttime. (Tr. 297:312.) He provided a
functioning version to NRZ by middle or late December of 2016. (Tr. 298:6
8, 598:56.) NRZ paid Bassil $6,000 for his initial development work and
because the product was still a prototype software that was not 100
percent complete NRZ has continued to pay him $500 to $1,000 per week
for maintenance and bug fixes. (Tr. 345:5346:2, 598:1017.)
Bassil, Zalta, and Shamah all vigorously denied on the stand that they
had relied on NRZs detailed knowledge of AutoPricer v.3s product when
building TickPricer. According to Bassil, he was able to construct TickPricer
relatively quickly and cheaply because he was building off of a premade
application framework that he recycled from his prior development
projects (Tr. 303:24304:16), because he used a generic user interface (Tr.
304:1722), and because he already had experience with designing a similar
product an Amazon price matching tool (Tr. 281:19282:10). Bassil
testified that, while developing TickPricer, he did not really pay too much
attention to the ninepage PDF that Zalta had sent him (Tr. 357:12) because
he simply had no need to refer to the screenshots of the sample pricing
software, which we know was AutoPricer v.3 (Tr. 308:13). According to
Bassil, he only referred back to the PDFs images of the SkyBox POS to
understand what data points [he] need[ed] to pull from the point of sale.
(Tr. 308:1620.)
Both Zalta and Bassil further denied that Bassil was ever able to use
AutoPricer v.3 or even that Zalta ever showed Bassil how AutoPricer v.3
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For instance, on August 16, 2016 the day Zalta awarded the bid to
Bassil he asked Bassil, What would be the next steps? Do you need me to
create a list of every single small aspect that the software should have? I can
walk you through our current software now. Let me know. (DX40 at
NRZ_000048.) NRZs current software, of course, was AutoPricer v.3. The
next day Zalta asked, Would you like to speak on skype so I can share my
screen[?] and Bassil replied, yes, lets do that. (Id.)
At the hearing, Bassil and Zalta could not recall if in fact they shared
screens at this time, but testified that if they had done so, Zalta would have
only walked Bassil through the POS software from which NRZs inventory
would be pulled not AutoPricer v.3. Bassil said: I honestly dont remember
what we did on that conversation, but, again, based on how I work, what I
would have been interested in is where is your inventory and how do I get to
it. (Tr. 301:1316.) When Zalta was crossexamined on the same topic, after a
substantial hesitation, he gave an answer similar to that offered by Bassil: At
that point the most relevant information [Bassil] would need to get started
was the POS API information. . . . So thats the software I would have shown
him at that time. (Tr. 638:19639:7.)
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and Zalta claimed that Zalta never responded to Bassils request. (Tr. 303:9
11 (Bassil), Tr. 591:1720, 592:917 (Zalta).) According to Zalta, he ignored
Bassils request because he wanted [Bassil] to build a totally unique pricing
tool and he didnt want [Bassil] using the Auto Pricer as a basis. (Tr.
592:1417.) Zalta added that he did not think it was a good idea to give
Bassil access to AutoPricer v.3 (Tr. 594:2); Zalta explained that, while he was
not certain whether his agreements with Broker Genius prohibited him from
granting access to a third party, he preferred to be extra careful. (Tr. 594:1
595:16.)
Because NRZ was still a Broker Genius client while it was building
TickPricer, Zalta was able to compare his new tool to AutoPricer v.3s
interface and technology. For instance, in October 2016, after Bassil gave
Zalta access to a nonfunctioning proof of concept version of TickPricer,
Zalta took an image of the proof of concept, modified it by adding new
elements, and sent it back to Bassil. (Tr. 372:221.) The modified proof of
concept that Zalta sent Bassil includes screenshots of AutoPricers widgets
that Zalta had pasted from Broker Geniuss user interface. (See Screenshot of
Modified Proof of Concept, PX41; Screenshot of Modified Proof of Concept,
PX61; Tr. 380:822.)
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The TickPricer software that Bassil built for NRZ replicates many of
AutoPricers essential features and functions. According to Dr. Koskinen, the
two products share a substantial overlap in their software architecture,
UX/UI, and solutions to scalability problems. (Koskinen Expert Report, PX62
at 1.5; see also Tr. 97:1718.)
Although defendants expert, Mr. Stephen Gray, opined that [t]he Auto
Pricer and TickPricer architectures are very different and that [t]he
architecture of the TickPricer application is much simpler (Gray Expert Report,
DX61 at 71), he based this opinion largely on an inspection of the source code
for each application (id. at 50, 60, 69, 74). As Dr. Koskinen testified,
differences in the source code are not dispositive because there are multiple
ways to implement the same software components through different coding
instructions. (Tr. 119:5120:11). Notably, Mr. Gray never relied on the actual
experience of using the TickPricer and AutoPricer v.3 software programs in
developing his expert report (Tr. 419:1618) and he did not
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NRZ did not just develop TickPricer to assist its own ticket brokering
business; it also marketed this software to other brokers, in competition with
Broker Geniuss AutoPricer product.
4Among these minor differences are: different color schemes (Tr. 344:6345:4); AutoPricer
v.3 uses separate subwidgets to enable users to select zones, rows, and sections, while
TickPricer builds a similar functionality into a single pricing calculator widget (Tr. 340:2
341:7, 342:19343:21); and TickPricer shows the average price of a pair of tickets in a
particular zone, while AutoPricer v.3 shows the lowest price (Tr. 341:22 342:1).
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Zalta testified that, as a result of this lawsuit, NRZ has decided not to
charge fees to any of its current users and not to accept any new users for the
duration of the litigation. (Tr. 601:1825.) However, he also testified that if
NRZ were to begin accepting users, its software would be able to
accommodate a total of approximately thirty users within one or two months,
which would yield approximately $250,000 in revenue. (Tr. 602:6603:13.)
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access to AutoPricer v.3s claimed trade secrets. He said that there is a very
real possibility that the company will be out of business within a period
of months if defendants are not enjoined. (Tr. 203:914.)
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In this case, and based on the evidence adduced to date, Broker Genius is
likely to be able to show that defendants improperly made use of the
information that Broker Genius alleges to be its trade secrets in breach of the
agreement between the parties. However, Broker Genius is not likely to
succeed in its trade secret misappropriation claims because it is not likely that
it will be able to show that the relevant information qualifies as trade secrets.
A. Misappropriation
One of the ways in which a plaintiff may establish that trade secrets were
misappropriated under New York law is by showing that a defendant used the
trade secrets in breach of an agreement between the parties. Schroeder v. Pinterest,
Inc., 133 A.D.3d 12, 28 (2d Dept 2015); see also N. Atl. Instruments,
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Inc. v. Haber, 188 F.3d 38, 44 (2d Cir. 1999) (applying New York law).5 On the
basis of the evidence presented at the preliminary injunction hearing, Broker
Genius is very likely to be able to show that NRZ and its principals made use
of the information that plaintiff claims to be its trade secrets the fourteen
software components which comprise the software architecture, UX/UI, and
scalability architecture of AutoPricer v.3 in a manner that breached NRZs
contractual obligations not to distribute, disseminate, copy, reverse
engineer, or create a source code equivalent of the AutoPricer v.3
software.6
5By contrast, the DTSAs definition of misappropriation prohibits the disclosure or use
of a trade secret only if that secret was acquired improperly, including through a
breach of a contractual duty to maintain secrecy. 18 U.S.C. 1839(5)(b)(i) (emphasis
added), 1839(6)(A). Broker Genius cannot establish a likelihood of success in its DTSA
claim for all the reasons that it cannot establish success on its state law claim, but also
because the evidence in this record does not show that defendants improperly acquired
the purported trade secrets; NRZ and the individual defendants were Broker Genius
customers when they first acquired the relevant information.
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Broker Genius is also likely to be able to show that NRZ breached the
Service Agreement by copy[ing], reverse engineer[ing], and creat[ing] a
source code equivalent of the Software or allow[ing] others to do so.8 (PX
8 6.4.) In the context of trade secret misappropriation cases where it is
well recognized that misuse can rarely be proved by convincing direct
evidence and that defendants witnesses will often directly deny
everything, QCo Indus., Inc. v. Hoffman, 625 F. Supp. 608, 618 (S.D.N.Y. 1985)
(citation omitted) copying can be established by showing that a defendant
had access to the alleged trade secrets and that there is a substantial
similarity between the original product which embodied those trade secrets
and the alleged copy created by the defendant, Fabkom, Inc. v. R.W. Smith &
7Defendants contend that they did not misappropriate any alleged trade secrets because
they gained access to them while they were good faith clients of Broker Genius. (Defs.
PreHearing Mem. 13.) The Court has ample reason to doubt defendants
characterization of themselves as good faith clients given the evidence that they were
actively developing a competing product while continuing to use Broker Geniuss
software; that they obtained additional information about Broker Geniuss products
through Shamahs brother even after terminating their license; and that, as soon as their
own software was functional, they began to aggressively compete with Broker Genius. In
any event, defendants argument is misguided; the relevant issue in this case is improper
use, not improper acquisition, of trade secrets.
8 Although trade secret law does not forbid the discovery of the trade secret by . . .
reverse engineering, that is by starting with the known product and working backward
to divine the process which aided its development or manufacture, Kewanee Oil Co. v.
Bicron Corp., 416 U.S. 470, 476 (1974), [t]here is general agreement that . . . a contractual
provision against reverse engineering is enforceable, 11 Roger M. Milgrim, Milgrim on
Trade Secrets 1.05 (2017).
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Assocs., Inc., No. 95 CIV. 4552, 1996 WL 531873, at *9 (S.D.N.Y. Sept. 19, 1996)
(citation omitted).
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9Zaltas credibility is further eroded by his reliance on the same dubious explanation to
describe his motivation for sending a threepage PDF comprised entirely of annotated
screenshots of AutoPricer v.3 to Saqib, another developer. The vast majority of
annotations in that PDF contain no references to SkyBox or StubHub and are instead
descriptions of AutoPricers various widgets and features. (See PX31.)
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1. Legal Standard
New York courts define trade secrets with reference to section 757 of the
Restatement of Torts. According to this definition, a trade secret is any
formula, pattern, device or compilation of information which is used in ones
business, and which gives him an opportunity to obtain an advantage over
competitors who do not know or use it. Ashland Mgmt. Inc. v. Janien, 82
N.Y.2d 395, 407 (1993) (citing Restatement of Torts 757, cmt. b (1939)); see
also N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 44 (2d Cir. 1999) (describing
New York law). Thus, trade secrets are only a subset of all commercially
valuable information. IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583 (7th
Cir. 2002).
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2. Discussion
Instead of contesting these two elements, defendants argue that plaintiff has
failed to identify its purported trade secrets with sufficient specificity and
10The DTSA adopts a definition of trade secrets that is substantially similar to the
definition adopted by New York courts. That statute describes trade secrets as all forms
and types of financial, business, scientific, technical, economic, or engineering
information, including patterns, plans, compilations, program devices, formulas,
designs, prototypes, methods, techniques, processes, procedures, programs, or codes,
whether tangible or intangible, so long as (1) the owner thereof has taken reasonable
measures to keep such information secret and (2) the information derives independent
economic value . . . from not being generally known to, and not being readily
ascertainable through proper means by others. 18 U.S.C. 1839(3)(A)(B).
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11For example, plaintiffs expert, Dr. Koskinen, defines the domain model (SC014) as
an abstract concept that embraces the entities that the software manipulates and the
relationships between these entities. (Koskinen Expert Report, PX62 at Ex. C, 1.14.)
Neither Broker Genius nor Dr. Koskinen has ever defined these entities or attempted
to explain how this software component is distinct from AutoPricer v.3s broader
software architecture.
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components generally fit into three categories that may be eligible for
protection: software architecture, UX/UI, and specific solutions to addressing
scalability problems in an automatic ticket pricing software.
12See IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 584 (7th Cir. 2002) (elements of a
user interface like the appearance of dataentry screens are exceedingly hard to call
trade secrets because things that any user or passerby sees at a glance are readily
ascertainable by proper means).
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171, 17374 (2d Cir. 1990); see also, e.g., Fabkom, Inc. v. R.W. Smith & Assocs.,
Inc., No. 95 Civ. 4552, 1996 WL 531873, at *6 (S.D.N.Y. Sept. 19, 1996) (The
source code, format, structure, and organization of the software is certainly not
known outside the business.) (emphasis added).
13 Mr. Gray relies essentially exclusively on conversations with defendants Bassil and
Zalta for his opinions about common practices in the automatic pricing industry and
ticket broker industry, and the Court thus puts little weight on his opinions.
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in the public domain, but the unified process, design and operation of which, in
unique combination, affords a competitive advantage and is a protectable secret.
Integrated Cash Mgmt., 920 F.2d at 174 (quoting Imperial Chem. Indus. Ltd. v. Natl
Distillers & Chem. Corp., 342 F.2d 737, 742 (2d Cir. 1965)).14
In this case, there is no question but that, no matter how generic or obvious
the individual widget components of AutoPricer v.3 may have been, Broker
Genius arranged them all into a unique and synergistic system architecture.
Defendants have conceded that, until they built TickPricer, AutoPricer was the
only tool on the market that allowed brokers to manage their ticket inventory
while also automatically pricing them for resale on exchanges such as StubHub.
(Tr. 542:57, 659:1719; see also Deposition of Michael Shamah, May 16, 2017,
Defs. PreHearing Mem., Ex. I at 71:924.) While Mr. Grays report does identify
several other ticket pricing applications, it does not explain the degree to
which those programs share the functionalities of AutoPricer v.3. (Gray Expert
Report, DX61 47.) Moreover, plaintiffs expert, Dr. Koskinen, has identified
significant functional and aesthetic differences between at least one of those
allegedly competitive programs and AutoPricer v.3. (Tr. 160:147; see also
Koskinen Rebuttal Expert Report, PX63 at 5.3). Cf. Wellogix, Inc. v. Accenture,
LLP, 823 F. Supp. 2d 555, 56263 (S.D. Tex. 2011) ([T]hough the functions of
Wellogixs software were known to the industry, other software companies did
not have identical functions in their software.), affd, 716 F.3d 867 (5th Cir. 2013).
14See also Softel, Inc. v. Dragon Med. & Sci. Commcns, Inc., 118 F.3d 955, 968 (2d Cir. 1997)
(applying New York law); Medtech Prods. Inc. v. Ranir, LLC, 596 F. Supp. 2d 778, 80405
(S.D.N.Y. 2008); Anacomp, Inc. v. Shell Knob Servs., Inc., No. 93 CIV. 4003, 1994 WL 9681, at
*8 (S.D.N.Y. Jan. 10, 1994) (applying New York law); Monovis, Inc. v. Aquino, 905 F. Supp.
1205, 1230 (W.D.N.Y. 1994) (applying New York law); Computer Assocs. Intl, Inc. v. Bryan,
784 F. Supp. 982, 988 (E.D.N.Y. 1992) (applying New York law); accord 1 Roger M.
Milgrim, Milgrim on Trade Secrets 1.08[5] (2017); Architectronics, Inc. v. Control Sys., Inc.,
935 F. Supp. 425, 43738 (S.D.N.Y. 1996) (applying Minnesota law); Harbor Software, Inc. v.
Applied Sys., Inc., 887 F. Supp. 86, 9091 (S.D.N.Y. 1995) (applying Illinois law).
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It is clear that Broker Genius has taken some care to limit the public
exposure of its purported trade secrets. The user interface of AutoPricer v.3 is
not advertised on the companys current website or in publicly available
demonstration videos. And users can only access the software with
passwords that they must keep confidential. In addition, the company does
ensure that its employees sign both nondisclosure agreements and employee
handbooks that broadly identify the companys technology and products
as proprietary and/or confidential information. (PX53 at 9.) Moreover, the
individual disclosures highlighted by defendants during the preliminary
injunction hearing Broker Geniuss 918 Patent Application, its publication
of screenshots of a predecessor software, and the brief demonstrations to
customers did not necessarily extinguish Broker Geniuss property rights in
its trade secrets. Nevertheless, because Broker Genius regularly disclosed its
alleged secrets to each of its customers without notifying them of the
informations confidential nature or binding them to confidentiality
agreements, Broker Genius is unlikely to be able to show that it undertook
reasonable measures to protect the secrecy of its alleged trade secrets.
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15Broker Genius erroneously suggests that the publication of a patent only extinguishes
a trade secret if the alleged misappropriators actually relied upon that disclosure. The
foundation of this argument is a 1953 decision by the United States Court of Appeals for
the Second Circuit, which states: It matters not that defendants could have gained their
knowledge from a study of the expired patent and plaintiffs publicly marketed product.
The fact is that they did not. Instead, they gained it from plaintiffs via their confidential
relationship. Franke v. Wiltschek, 209 F.2d 493, 495 (2d Cir. 1953). Franke does not
contradict federal and New York law on the overriding importance of a plaintiffs efforts
to preserve the secrecy of its trade secret. In Franke, the patent at issue was not held by
the plaintiffs. Nor did it reveal the entirety of the plaintiffs alleged trade secret; the
missing elements had to be ascertained by reverseengineering the plaintiffs product.
See Franke, 209 F.2d at 500 (Frank, J., concurring in part and dissenting in part). Thus,
Franke simply supports the uncontroversial proposition that it is no defense in an action
[for misappropriation of trade secrets] that the process in question could have been
developed independently, without resort to information gleaned from the confidential
relationship. Imperial Chem. Indus. Ltd. v. Natl Distillers & Chem. Corp., 342 F.2d 737, 743
(2d Cir. 1965) (citing Tabor v. Hoffman, 188 N.Y. 30, 35 (1889)).
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(See Tr. at 165:718, 223:614.) See Sylmark Holdings Ltd. v. Silicone Zone Intl
Ltd., 5 Misc. 3d 285, 298 (N.Y. Cty. 2004) (granting preliminary injunction
where plaintiffs patent consist[ed] solely of six line drawings and did
not disclose the precise dimensions, specifications, or other proprietary
information with respect to the actual final design and manufacture of the
product at issue).
Finally, Broker Genius did not disclose the entirety of its trade secrets in
product demonstrations to potential customers despite the fact that Broker
Genius representatives never required members of their audience to assent to
the Terms of Use or sign any nondisclosure or confidentiality agreements.
(Tr. 84:619, 85:711, 86:15.) The Court credits the testimony of Broker
Geniuss Vice President of Sales, Zachary Ellman, who explained that these
demonstrations were only three to eightminutes long and could not have
revealed the full extent of Broker Geniuss trade secrets.16 (Tr. 44:318.) After
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all, the entire purpose of the demonstrations was to entice and encourage
viewers to sign up for a thirtyday trial, in which they would receive the
training necessary to fully understand and use the software. (Tr. 39:1220.)
To protect information as a trade secret, there only needs to be so much
[secrecy] that except by the use of improper means, there would be
difficulty in acquiring the information. A.H. Emery Co. v. Marcan Prods.
Corp., 389 F.2d 11, 16 (2d Cir. 1968), cert. denied, 393 U.S. 835 (1968) (quoting
Restatement of Torts 757, cmt. b).
they or an agent of their companies had already signed up for accounts with Broker
Genius and thereby accepted the Terms of Use. (Tr. 261:34, 268:3270:8; Broker Genius
Client Account Creation Dates, PX92 at 12 (Malekian); Tr. 531:16533:21; Broker Genius
Client Account Creation Dates, PX92 at 9 (Shamah).)
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script that would have kept certain topics offlimits (Tr. 65:79, 70:718, 72:15
24, 80:1213), suggests that Broker Geniuss representatives did not treat any
particular userfacing element of the software as confidential. Cf. Invesco
Institutional (N.A.), Inc. v. Deutsche Inv. Mgmt. Americas, Inc., Index No.
650154/07, 2009 WL 6442871, at *9*10 (N.Y. Cty. 29, 2009).
The one disclosure that did destroy Broker Geniuss claim that its
software architecture, UX/UI, and scalability solutions are trade secrets is the
unfettered access to this information that Broker Genius grants to each of its
customers. Every user of Broker Geniuss software is given access to the
software itself, as well as extensive training sessions, user manuals,
explanatory videos, and feature update emails that explain how the software
works and how to take advantage of each of its functionalities. In addition,
Broker Geniuss customer support staff provide answers to user questions
about operations such as the cycle speeds that are the focus of Broker
Geniuss scalability architecture trade secret and which may not otherwise be
apparent to the users. (See Email from Broker Genius to NRZ, Nov. 18, 2016,
PX26; see also Email from Abe Harary to Zalta, Feb. 23, 2017, Defs. Post
Hearing Mem., Ex. A (forwarding Feature Update sent by Broker Genius
to its customers, notifying them of AutoPricers pricing cycle frequencies
and explaining that Broker Genius prioritize[s] pricing cycles by event and
onsale date to keep things running smoothly).) Indeed, the breadth of
Broker Geniuss disclosures explains why defendants were able to duplicate
major portions of AutoPricer v.3s user interface, software architecture, and
scalability solutions with such speed and for relatively little cost, all despite
the lack of any evidence that defendants obtained access to AutoPricer v.3
that was different in kind from that which Broker Genius granted to its other
customers.17
Although Broker Genius gives each of its users access to its purported
trade secrets, it does not make oral representations to its users that its
software or any of its components are confidential during trainings or
17While Zachary Ellman testified that the training defendants received on AutoPricer
v.3 was on the excessive end of what was normal for Broker Genius clients, he also
acknowledged that other customers who regularly used the software were trained for
similar periods of time. (Tr. 36:1522.)
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explanatory videos. Nor does it mark its training materials, emails about the
softwares functionalities, or the software itself with confidentiality legends.18
Accordingly, Broker Geniuss only means of notifying its users that the
software they are using contains trade secrets is the Terms of Use and the
Service Agreement. Because the Terms of Use is the only licensing agreement
that is in place when Broker Genius discloses its purported trade secrets to
most AutoPricer v.3 users, the Court focuses its discussion on this document.
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property right is extinguished.); Fabkom, Inc. v. R.W. Smith & Assocs., Inc.,
No. 95 Civ. 4552, 1996 WL 531873, at *7 (S.D.N.Y. Sept. 19, 1996)
(Distribution to clients of a computer program through a licensing agreement
requiring confidentiality does not destroy secrecy of a trade secret, but rather
reinforces it.) (emphasis added); see also Nova Chems., Inc. v. Sekisui Plastics
Co., Ltd., 579 F.3d 319, 32728 (3d Cir. 2009) (information disclosed to
defendant distributor pursuant to a license lost its trade secret status
because the license did not require defendant to maintain the secrecy of any
information it had acquired from [plaintiff]); Structured Capital Sols., LLC v.
Commerzbank AG, 177 F. Supp. 3d 816, 832 (S.D.N.Y. 2016) (granting summary
judgment to defendant on trade secret misappropriation claim because the
agreement that plaintiff characterized as a confidentiality agreement did not
actually place defendant under an obligation to maintain [the]
confidentiality of plaintiffs alleged trade secrets).
Broker Genius contends that the Terms of Use provision providing that
users of AutoPricer v.3 may not [r]eproduce, modify, display, publicly
perform, distribute or create derivative works of the Site or Apps or the
Content is in fact a provision providing for confidentiality. (Pl.s Post
Hearing Mem. 19 (quoting Terms of Use, updated June 12, 2014, PX56 at
4).) However, plaintiff offers no support whatsoever for its conclusory
interpretation. While the user restrictions of the Terms of Use do expressly
bar users from showing others the AutoPricer v.3 user interface including,
one would infer, through a series of screenshots they do not amount to a
confidentiality or nondisclosure clause that notifies users of the secrecy of
any aspect of AutoPricer v.3 or precludes them from describing to others the
softwares functions, structure, and appearance.
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19 See also LivePerson, Inc. v. 24/7 Customer, Inc., 83 F. Supp. 3d 501, 515 (S.D.N.Y. 2015)
(finding that plaintiff software developer adequately pled claim for trade secret
misappropriation against a former comarketer where plaintiff licensed its software to
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both its clients and the defendant through agreements that included confidentiality
provisions); Mobius Med. Sys., LP v. Sun Nuclear Corp., No. 4:13CV3182, 2013 WL 6498981,
at *13 (S.D. Tex. Dec. 10, 2013) (granting preliminary injunction to plaintiff software
developer where defendant distributor and licensee end users were bound by
confidentiality provisions in both the Distribution Agreement and the End User License
Agreements); iSystems, Inc. v. Softwares, Inc., No. Civ. 021951, 2004 WL 742082, at *2 (D.
Minn. Mar. 29, 2004) (denying defendant software distributors motion for summary
judgment on trade secret claim where plaintiff software developers clickthrough software
licenses with its end users provided that they could not disclose any confidential
information related to the software); Monovis, Inc. v. Aquino, 905 F. Supp. 1205, 1228
(W.D.N.Y. 1994) (granting permanent injunction to plaintiff that licensed its singlescrew
compressor technology through an agreement requiring licensees not [to] disclose to third
parties the tolerances or dimensions of plaintiffs screws).
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In the case sub judice, Broker Genius cannot establish serious questions
going to the merits of its trade secret misappropriation claims for the same
reasons that it is not likely to succeed in proving those claims at trial.
Discovery on Broker Geniuss trade secrets claim has already revealed that
Broker Genius divulges the same information that it alleges to have been
misappropriated by defendants to each of its users as a matter of course and
that it does so pursuant to a Terms of Use agreement that does not provide
for the confidentiality of that information.
VI. CONCLUSION
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