Theft of Trade Secrets regarding Internet Advertising

After acquisition discussions broke down between an Internet advertising affiliate network and the potential target, a web-advertising software company, the latter filed a complaint alleging that the defendants misappropriated information during the due diligence process.

After acquisition discussions broke down between an Internet advertising affiliate network and the potential target, a web-advertising software company, the latter filed a complaint alleging that the defendants misappropriated information during the due diligence process. The plaintiff claimed that the defendants misappropriated trade secrets, including business methods, customer lists and willingness to pay, and proprietary software techniques and algorithms, which were allegedly used to “build” instead of “buy” the ability to provide a new service offering.

Each expert provided affirmative and rebuttal reports as well as deposition testimony.

Defense counsel retained Cornerstone Research to work with three experts in this federal court case. Each expert provided affirmative and rebuttal reports as well as deposition testimony. Dr. Michael Horvath of Strava, Inc., testified regarding the various aspects of the merger and acquisition due diligence process, including whether information requested by the defendants during the acquisition process was typical and whether the concerns raised during the due diligence process were of the magnitude that would reasonably lead to a termination of the acquisition process. Professor Ward Hanson of Stanford University provided opinions regarding Internet advertising business practices, what developments were actually novel at various points in time, functional drivers of certain website elements, and the extent to which our client could have made use of the alleged trade secrets (based on an analysis of financial and web traffic data). Professor Gordon Klein of the University of California, Los Angeles, opined on damages issues, including a reasonable royalty calculation for the alleged trade secrets and whether the financial performance of the defendants was consistent with the business model shift implied by the claimed misappropriation and use of the trade secrets. The case settled.