July 2020: Victory for StubHub and eBay in Federal Trade Secret and CFAA Suit

After nearly half a decade of litigation, Quinn Emanuel successfully obtained summary judgment for clients StubHub and eBay on a federal trade secret claim in a case against Calendar Research, LLC involving a social planning mobile application named “Klutch.”  StubHub considered acquiring the company that developed the Klutch app in early 2015, but when the deal fell through, the app development company became insolvent.  StubHub hired three employees from the company (the former founder and two engineers), and those three individuals—who are also defendants to the suit—thereafter developed an app for StubHub. 

Calendar Research bought the defunct app development company’s assets, and sued StubHub and eBay for trade secret misappropriation and violation of the Computer Fraud and Abuse Act (“CFAA”), alleging that the companies had misappropriated trade secrets related to the Klutch app.  The Honorable Stephen V. Wilson of the Central District of California immediately ordered an expert source code review and, after a multiple-month expedited discovery period, granted partial summary judgment, concluding that “the Klutch code is not a protectable trade secret, even as a compilation” and that there was no genuine issue of material fact regarding misappropriation of source code by StubHub in its applications.  However, in a clarification order, the Court held that the case could proceed as to the theory “that StubHub misappropriated the Klutch code in different ways than using the code.”  Quinn Emanuel conducted a second round of discovery on the non-code based DTSA and CFAA claims.

Calendar Research identified four categories of purported trade secrets in this second round of discovery: (1) viral capability (or the “ability of [an] application to grow its user base organically with user-to-user interactions, rather than through marketing”), (2) UI/UX and design, (3) venue focus, and (4) integration of third-party applications.  Quinn Emanuel extracted key admissions during depositions of the Plaintiff’s experts and main witnesses and moved for summary judgment on the basis that Calendar Research had failed to identify a single trade secret, offer any proof in support of their misappropriation, or provide evidence that the defendants had conspired to unlawfully access plaintiff’s computers.  In an extensive 41-page order, Judge Wilson agreed and held that Calendar Research failed to provide a reasonable particular definition of any of its four categories of purported trade secrets, noting that the disclosures were so vague that they “read[] like an inventory of categories of Plaintiff’s scientific or strategic business information.”

The only federal claim remaining, brought under the CFAA, was dismissed shortly after the Court’s summary judgment order on the trade secrets claim, confirming that StubHub and eBay will not face liability on the federal claims.  The Court is now considering whether it should retain jurisdiction over state law claims in the case, or remand the case to Los Angeles Superior Court.