HOME

TheInfoList



OR:

''Christou v. Beatport, LLC'', 849 F. Supp. 2d 1055 (D. Colo. 2012), was a District Court of Colorado case in which the court held that MySpace friend lists could constitute
trade secret Trade secrets are a type of intellectual property that includes formulas, practices, processes, designs, instruments, patterns, or compilations of information that have inherent economic value because they are not generally known or readily ...
s. While the names in the friend lists could be found in public directories, the court considered that the "ancillary information" of the friend list provided a means of contact with permission that was not publicly available.


Background of the case

During the 1990s, plaintiff Regas Christou founded several nightclubs in the Denver area, comprising the South of Colfax Nightlife District (known as “SOCO”). These clubs hosted live performances from DJs playing electronic dance music. In 1998, the defendant Bradley Roulier was employed by Christou as a talent buyer for booking
A-list An A-list actor is a major movie star, or one of the most bankable actors in a film industry. The A-list is part of a larger guide called ''The Hot List'', which ranks the bankability of 1,400 movie actors worldwide, and has become an industry ...
DJs at Christou's SOCO venues. While employed under Christou, Roulier and other coworkers conceived the idea of
Beatport Beatport is an American electronic music-oriented online music store owned by LiveStyle. The company is based in Denver, Los Angeles, and Berlin. Beatport is oriented primarily towards DJs, selling full songs as well as resources that can be u ...
, an online marketplace founded in 2003 after Christou had loaned an initial $50,000 in exchange for eventual partial ownership of the company. Christou continued to promote Beatport as it grew into the premier marketplace for electronic dance music. However, in March, 2008, Roulier left Christou's employment to found Beta Nightclub, and never fulfilled his promise of granting Christou partial ownership of Beatport. Given the influence of Beatport in the electronic dance music marketplace and experiences of DJs canceling shows at his own SOCO clubs in exchange for rebooking at Beta, Christou alleged that Roulier used Beatport to coerce DJs into playing at Beta instead of one of his SOCO nightclubs. Christou filed a complaint to the District Court of Colorado seeking damages, suing Beatport for nine claims including unlawful tying in, attempted monopolization, and theft of a trade secret—the MySpace profile credentials used for connecting his SOCO clubs to DJs.


Opinion of the Court

On 14 March 2012, the court responded to the defendants' motions to dismiss each of Christou's claims. The court dismissed Christou's antitrust claims but denied Beatport's motion to dismiss the trade-secret misappropriation claim.


Trade Secret Misappropriation

To determine whether Christou's MySpace profile was in fact a trade secret, the court consulted the analysis presented in ''Colorado Supply Co. v. Stewart'', 797 P.2d 1303, 1306-07 (Colo. App. 1990): whether reasonable steps were taken to protect the secrecy and restrict access of the profile, whether employees knew customers' names from general experience, whether customers commonly dealt with more than one supplier, whether customer information could be readily obtained from public directories or other sources outside of Christou's business, and lastly whether the owner of the customer list expended great cost and effort over a considerable period of time to develop the files, and whether it would be difficult for a competitor to duplicate the information. The court agreed with the plaintiff's argument that the profile was a "
database In computing, a database is an organized collection of data stored and accessed electronically. Small databases can be stored on a file system, while large databases are hosted on computer clusters or cloud storage. The design of databases s ...
" of contact information instead of a mere list of names: the profile not only held contact information that was not readily available to the public but also served as a means to notify and promote directly to the DJs. As a result, the court held that because the MySpace profile had been properly password protected to a select few of Christou's personnel, took great cost to develop, and provided a means of contact instead of just a simple customer list of names, the profile could be held as a trade secret. Moreover, because Roulier was aware of the password protection of the profile and did not reconstruct his own MySpace friend list to contact DJs, the court ruled that Beatport (Roulier) had knowingly misappropriated the trade secret, citing the analysis used in ''Gates Rubber Co. v. Bando Chemical Indus. Ltd.'', 9 F.3d 823, 847 (10th Cir. 1993) -- that the defendant had a trade secret that was used without consent, and that the trade secret was obtained by improper means. The court also considered the public use of the trade secret, as Beatport had promoted itself using the plaintiff's MySpace profile, as grounds for Roulier's knowing of improper acquisition.


Antitrust Claims

The court also ruled in favor of the plaintiff's claim that Beatport could be charged with attempted monopoly in the market for A-list DJ live performances. At the time of the ruling, Roulier and his club Beta controlled over half of the Denver metro area market for live performance by A-list DJs, and showed specific intent to monopolize and further such a monopoly in using anticompetitive and predatory conduct. The court also granted all other antitrust claims made by the plaintiff. The court dismissed violations of
RICO The Racketeer Influenced and Corrupt Organizations (RICO) Act is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. RICO was en ...
because the plaintiffs did not meet pleading requirements in not demonstrating patterns of racketeering activity (specifically, acts of wire fraud, mail fraud, and bank fraud and theft) by Beatport and Roulier. The court dismissed in part the plaintiffs' claim of unlawful tying. The court wrote that, although Christou's SOCO nightclubs had sufficient facts to support antitrust standing, it must consider Christou as an individual. The court found that Christou had alleged sufficient facts that there had been an antitrust injury (to his reputation), but not that the injury to Christou as an individual resulted directly from the antitrust violation.


Case significance

In this case, a federal court held that a MySpace friend list could constitute a trade secret. While the court considered the Colorado statute for trade secrets in its decision, other states such as Maryland, Virginia, and the District of Columbia have nearly identical statutes adopted under the Uniform Trade Secrets Act. The analysis presented by the court, concluding that the MySpace profile held "ancillary information" that "cannot be found in public directories" provided a differing viewpoint from past cases, such as ''Sasqua Group, Inc. v. Courtney'', 2010 WL 3613855 (E.D.N.Y. Aug. 2, 2010) which determined that
social media Social media are interactive media technologies that facilitate the creation and sharing of information, ideas, interests, and other forms of expression through virtual communities and networks. While challenges to the definition of ''social medi ...
connections such as on
Facebook Facebook is an online social media and social networking service owned by American company Meta Platforms. Founded in 2004 by Mark Zuckerberg with fellow Harvard College students and roommates Eduardo Saverin, Andrew McCollum, Dustin Mosk ...
or
LinkedIn LinkedIn () is an American business and employment-oriented online service that operates via websites and mobile apps. Launched on May 5, 2003, the platform is primarily used for professional networking and career development, and allows job se ...
were not in fact trade secrets due to the fact that the lists of connections were available to the public. Professor of Law
Eric Goldman Eric Goldman (born April 15, 1968) is a law professor at Santa Clara University School of Law. He also co-directs the law school's High Tech Law Institute. and co-supervises the law school's Privacy Law Certificate. Career overview Goldman is a ...
criticized the opinion, saying that it was "opaque and confused." The court holding failed to answer many questions regarding the trade secret ancillary information, such as whether one can copy a MySpace friends list ''without'' committing any trade secret misappropriation. Goldman wrote in a blog post that this clearly should be possible. He then pointed out that a user with a copy of the friends list could then send private messages to each of those friends, which again, should not be a violation of trade secret either. Ultimately, he suggested that the decision may have been clearer if the Court treated the account's login credentials as a trade secret instead. The commentary surrounding this case has been careful to avoid the affirmative declaration that Christou's friends list was a trade secret. This is because the court's order applied to a motion to dismiss. An order from this context does not actually certify that the friends list was a trade secret. Instead, the court concluded "only that Roulier, et al., had not proven that the list ''could not'' be a trade secret." The decision allowed Christou to proceed with his claim, and he would then have to prove that the friends list was a trade secret. In a similar case regarding whether social media accounts could be held as trade secrets, '' PhoneDog v. Kravitz'', the United States District Court for the Northern District of California determined that
Twitter Twitter is an online social media and social networking service owned and operated by American company Twitter, Inc., on which users post and interact with 280-character-long messages known as "tweets". Registered users can post, like, and ...
follower lists and passwords could constitute trade secrets. Law firm Hahn Loeser ranked this case #7 in its Trade Secret Litigator's Top 10 Trade Secret and Non-Compete Cases of 2012. The list envisioned that businesses would soon come to terms with the increasing importance of corporate social media account ownership policies, and that there would be fewer such disputes.


References


External links

{{caselaw source , case = Sasqua Group, Inc. v. Courtney , other_source1 = Google Scholar , other_url1 = https://scholar.google.com/scholar_case?case=1282967900053644911&hl=en&as_sdt=6&as_vis=1&oi=scholarr
Beatport
United States district court cases 2012 in United States case law Trade secret case law