Thanks to the release of Nike's complaint, we suddenly have quite a bit more information about the pending lawsuit between the sportswear giant and its three former design directors who jumped ship to Adidas, taking with them what the lawsuit claims is a "treasure trove" of confidential information, about $10 million worth of information.
Since the lawsuit was filed last week, Denis Dekovic, Marc Dolce and Mark Miner, the three defendants named in the lawsuit, have made individual written statements acknowledging that they were in talks with Adidas before officially leaving Nike. The three also acknowledge taking examples of Nike work with them after leaving the company, but describe that work as being "ancient history." They each deny that they had begun any work in connection with Adidas's Brooklyn Design Studio while still employed by Nike, and deny attempting to recruit other Nike employees to join them at Adidas.
According to Nike's complaint, which cites breach of contract, breach of duty of loyalty, breach of duty of good faith, misappropriation of trade secrets, conversion, and "civil conspiracy," among other charges, "the Defendants have expressed their desire to financially gain from exploiting the stolen tade secrets, including by promoting their knowledge of Nike's trade secrets as a means of enticing Adidas to employ them."
The Oregon-based sports giant alleges that Dekovic, Dolce and Miner's "plot sprung to life in April of 2014, when they began a campaign to promote their indepdent design studio venture by, among other things, buying thousands of phony social media followers to help create the false perception of buzz and popularity surrounding their design careers." Apparently that worked and the three began working for Adidas as consultants ("because formal employment agreements would be an obvious, blatant and overt breach of [their] agreements with Nike"), thereby signing full time employment contracts in late August after Adidas agreed to provide them with legal support and cover the legal fees "if ever Nike discovered their disloyalty and deception."
The complaint cites an email correspondence, from Dekovic to Tauna Dean, the Portland-based director of talent acquisition for Adidas Group, dated August 29, 2014. Nike asserts that Dekovic met with Dean as early as late June, sending her an email on June 21, 2014 with a copy of his Nike noncompete agreement. In the August email, Dekovic reportedly sets out the proposed conditions for the Adidas design studio, including the roles and responsibilities for the proposed studio, compensation ($200,000 sign-on bonus, a performance bonus linked to the studio's production, a $500,000 retention bonus "divided equally per year covers our stock options," and a $60,000 housing allowance), financial and other considerations, location and physical requirements of the design studio and team structure. The email further sets out details specific to the noncompete year, including insurance coverage, relocation expenses, trips "to start building vision and connections," and payment of the other half of their Nike noncompete salary.
On June 29, 2014, Dekovic met with Adidas' then Design Direct (and current VP) to discuss what the structure of Defendants' team would be at Adidas and how it would operate. Following this discussion, Defendants agreed to create "a 'blueprint' setting out the details of the Brooklyn Creative Design Studio." They presented the completed blueprint to the team at Adidas on July 16th, at which point they were still employed by Nike.
Nike's complaint goes on to detail how the "conspirators" stole its trade secret information: "Dekovic told Nike his laptop had stopped working, took that broken laptop to an independent contractor, and had the contents of his Nike-issued laptop copied, including thousands of proprietary documents related to Nike's global product lines. He then returned the broken laptop to Nike without uttering a word about the copy he had made," and leading Nike to believe the laptop had not been used since early September. Moreover, "just three days before leaving Nike, Dolce sent an email to his personal email account with highly confidential design drawings related to an as-yet unreleased shoe designed for one of Nike's sponsored athletes."
According to Nike, the totality of the stolen information consists of: Nike's future strategic development plans, products offerings and product launches, which Nike classifies as "extremely confidential and commercially sensitive master plans for the next three to for years," unreleased product design materials for the "next two to three years," unreleased product technology, financial product performance information, including "a non-public financial breakdown of the footwear sales, including past performance data, gross margin expectations, and projected growth for the next 12 to 18 months," marketing camapign materials, virtual testing methodologies, and blueprints for product launches, including "step-by-step instruction manuals for conducting a successful product launch." Thereafter, the three "attempted to ease the incriminating emails and text messages from their Nike-issued iPhones and laptops," and resigned, each assuring Nike that they would "abide by the terms of their Noncompete Agreements and that they had returned all confidential, proprietary, and trade secret Nike information, knowing full weel that they had not."
Certainly anticipating Dekovic, Dolce and Miner's defense that they didn't know that they were acting illegally, Nike claims: "Defendants' communications to one another startlingly reveal the fact that they knew all along that what they were doing was illegal, and feared that Nike might discover their unlawful scheme." In fact, they knew that their noncompete agreements with Nike prohibited them from "being connected in any manner with Adidas for a full one-year period after their leaving their employment at Nike." Nike cites some examples, including that "Miner told Dekovic and Dolce that he 'Wish[ed] [they] both were using personal phones' and suggested that 'we should just communicate on whats[ap]p.'" The three also "ordered new personal mobile devices and moved their cellular accounts from Nike in an effort to hide the evidence of their scheming," as well as reset their old phones and deleted most of the files on their computers.
Nike's complaint details how the designers' departures went down, revealing that on September 22, 2014, two days before Adidas announced the addition of Dekovic, Dolce and Miner to its team, the three individually met with various execs at Nike, to inform them that they were leaving Nike to launch a design studio Adidas. According to the complaint, Dekovic, who Nike clearly paints as the mastermind of the scheme (who, its worth noting, had allegedly had another sneaker project on the side the whole time that he did not divulge to Nike, Adidas or Dolce and Miner), stated "unequivocally that he was not interested in having Nike try to negotiate his continued employment. However, he also stated that he loved Nike, and even expressed a desire to do business with Nike in the future." Meanwhile, Nike alleges that Adidas was prepared to compensate the three designers in exchange for bringing fellow Nike employees, including designers, to Adidas.
Dolce was reportedly "torn because of how much Nike meant to him. He said his wife and children loved Portland and wanted to continue living there. He was reluctant about leaving Nike and was willing to consider an offer from Nike to stay." The following day, Nike Design vice president John Hoke "made Dolce an offer to stay with Nike but Dolce turned it down."
And last but not least in less illegal, more embarrassing news, a May 18, 2014 from Dolce to Dekovic reveals that Dolce advised Dekovic to buy some Twitter followers. He wrote: "You have 500. I would buy at least 2,500 for $25. It makes it better approaching clients and then seeing you have this base." According to Nike's complaint, 85% of the defendants' Twitter and Instagram followers are fake.
According to a statement on behalf of Dekovic, Dolce and Miner, the three defendants said: "During our entire careers, we have given nothing but our maximum effort. During our time at Nike, we collectively poured in hours, passion and dedication beyond what was asked or expected of us, often prioritizing our jobs over our families. Until the very end, we stayed engaged, loyal and committed. We have a tremendous amount of respect for our colleagues and Nike and would never do anything to harm them."
More to come …