You may recall that in December, Nike filed a $10 million lawsuit against three of its former senior shoe designers, accusing them of stealing its trade secrets and joining rival, Adidas. Specifically, the Oregon-based sportswear giant is alleging that former Nike employees, Denis Dekovic, Marc Dolce and Mark Miner violated their non-compete agreements by stealing a “treasure trove” of trade secret information (think: confidential design and business documents, including drawings for unreleased shoes made for one of Nike’s sponsored athletes) and taking that info to Adidas where they are setting up a copycat of Nike’s design studio. Well, as of this week, the three defendants filed their response to Nike’s suit (a legal document known as an Answer), including counterclaims of their own against Nike.
Not surprising, given the strength with which Nike asserts in its lawsuit that the designers broke any array of laws (including stealing “years” worth of top secret product, marketing, and financial information), Dekovic, Dolce and Miner’s response is bold. Not only do the designers deny the accuracy of the claims that Nike has asserted against them, they allege that Nike created a “culture of distrust and intimidation” which cause them to seek employment elsewhere; Nike hacked their phones, emails and social media accounts; and Nike filed this “meritless” lawsuit purely as a “publicity stunt.” Read on …
Before we get to the counterclaims (aka what the designers allege that Nike did to break the law), here’s what Dekovic, Dolce and Miner, (collectively, the defendants) had to say in response to the claims Nike asserts in its lawsuit. Dekovic (formerly Nike’s Senior Designer and Design Director and Senior Design Director for Nike’s Global Football division), Dolce (former Senior Designer in Nike’s Active Life Division, Design Director of Nike Sportwear, and Design Collections Lead for Nike Sportswear), and Miner (former footwear designer in Nike’s Global Women’s Training division and Senior Footwear Designer of Nike Running) allege that Nike’s claims are “meritless.” They back up this assertion by stating that Nike has yet to “allege a single instance of disclosure or misappropriation of a protected trade secret or any expression of intent to do so. The response also states that “none of the designers has ever passed any trade secret information to Adidas or any other competitor, and they will not ever do so.”
A quick note: a trade secret is generally any confidential business information that provides a company with a competitive edge. They commonly take the form of sales methods, distribution methods, consumer profiles, advertising strategies, lists of suppliers and clients, and manufacturing processes. The formula for Coca-Cola, for instance, is a trade secret. Nike’s marketing strategy is also a trade secret. The unauthorized use of such information is regarded as a violation of the trade secret and thus, a violation of the law.
In addition to calling Nike’s claims meritless, the three designers address why they decided to jump ship to Adidas, claiming that they simply wanted out from Nike’s “stifling bureaucratic overlay.” According to court documents, Dekovic, Dolce and Miner “independently decided that the Nike corporate culture was stifling their creativity. And they, along with many of their design co-workers, were alarmed about the culture of distrust and intimidation that permeates the relationships between Nike executives and Nike design creatives.”
The designers deny that they left Nike with the purpose of stealing the company’s secret information and joining Adidas in order to create a knockoff of Nike’s existing design studio. They claim that “nothing about their idea for an independent studio relies on any confidential information of Nike’s” and that they “are not interested in and will not use old Nike designs or old Nike ideas in their new venture. The trio is spearheading Adidas’ soon to be opened Brooklyn Creative Studio, a “small but essential operation aimed at exploring design direction,” one that Nike claims is not unlike its Oregon-based “Kitchen” research and development lab. Nike claims that Adidas loved its studio idea so much that it offered the designers lucrative employment contracts to jump ship from Nike.
Another interesting (and rather unsurprising) element of the designer defendants’ answer is the focus on social media. If you think back to Nike’s complaint, the sportswear giant focused a considerable amount of attention on the designers’ building up their social media presences — an effort Nike says the designers expended to give themselves an air of importance while pitching their studio idea. According to Nike’s complaint, Dolce advised Dekovic via email to buy social media 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.” Nike further alleged in its complaint that 85% of the defendants’ Twitter and Instagram followers are fake. With this in mind, there was unlikely that the defendants weren’t going to strike back, and they did. According to their answer:
The designers’ popularity on social media is not measured by numbers of followers, but by their followers’ participation and the vibrancy of their community. By that measure, the Designers are among the most popular designers on social media. Nike, on the other hand, recently had over a quarter-million “fake followers” removed from its Instagram account.
With that out of the way, it is worth noting that the answer is not all denials. The three designers admit a few things, as well. For instance, Dekovic admits that he had an “Apple technician copy data from his Nike-issued laptop to an external hard drive,” which he kept in his possession after leaving Nike. Dolce, on the other hand, admits that he deleted the contents of his Nike-issued MacBook before returning it to Nike. Both Dolce and Miner “admit that they restored their iPhones to factory default settings before returning them to Nike” — which they claim is “not inconsistent with Nike policy or practice.” Other wording in the answer suggests that the three defendants may still have confidential Nike information in their possession. The following language, for instance, is key: “To the extent that any of the Designers have old files or pictures that Nike contends are trade secrets, they do not want to keep them and have agreed to permanently delete them.”
Additionally, the designers admit that they “entered into employee invention and secrecy agreements with Nike,” and signed non-competition agreements. They also concede to “meeting with Brian Foresta, Eric Liedtke, and Paul Gaudio,” the latter of which is Adidas’ Global Creative Director, during the time when they were employed by Nike. Dekovic, who Nike’s complaint paints as the mastermind of the plot to start a rival design studio at Adidas, admits to meeting with Brian Foresta, Design Director for Originals Adidas America, on numerous occasions.
DEFENSES AND COUNTERCLAIMS
In addition to denying the claims that Nike has asserted against them, the designers set forth five defenses, including failure to state a claim, in their Answer. They assert that Nike’s complaint and “each and every cause of action within it fails to state ultimate facts sufficient to constitute a claim upon which relief may be granted.” They also claim that the Covenant Not to Compete and Non-Disclosure Agreements, as well as their Employee Invention and Secrecy Agreements, upon which Nike is relying, are invalid, as they are too broad and thus, impose an improper restraint on their ability to gain lawful employment after leaving Nike. The designers argue that as a result, the Agreements are not valid under Oregon state law, where the lawsuit was filed.
Another one of their defenses: Nike has “failed to enforce the terms of its non-competition and confidentiality agreements against other departed or departing employees; has failed to provide support and assistance to Defendants to identify and remove from Defendants’ electronic devices that which plaintiff now claims to be protected proprietary information and/or trade secrets; and released or leaked to the public information it now contends Defendants unlawfully possess.” And one more: the doctrine of Unclean Hands, which means that Nike’s claims rely on records it obtained unlawfully. (More about that in a minute!)
As for the claims that Dekovic, Dolce and Miner are accusing Nike of … Primarily, they claim that Nike violated the Stored Communications Act, a federal law that “imposes liability upon any person who ‘intentionally accesses without authorization a facility through which an electronic communication service is provided.” They allege that Nike violated this Act by “intentionally accessing one or more facilities, which include, but are not limited to, the facilities, servers, and networks used by iCloud, WhatsApp, Twitter, Facebook, and Gmail.” So, they are accusing Nike of hacking their phones, emails and social media accounts, etc. They state: “This lawsuit is based on Nike’s breathtaking breach of the Designers’ personal privacy. Although Nike claims to permit non-business use of the electronic communications systems, Nike monitored, read, copied and distributed its employees’ personal communications with friends and family.”
In that same vein, the designers are also accusing Nike of violating the Social Media Privacy Act, legislation that protects individuals from unwarranted invasions of their social media accounts by their employers, schools, etc. Dekovic, Dolce and Miner claim Nike violated this law by “accessing their social media accounts using the account authentication data stored and/or programmed on their electronic devices, in spite of reasonable measures taken to protect said personal social media account data.” And then there is the Invasion of Privacy – Intrusion upon Seclusion claim, which is also based upon Nike’s alleged hacking into the defendants’ social media accounts, including email applications, networking platforms, and messaging applications.
One final claim: Bad Faith. The designers claim that Nike’s “trade secrets claims are meritless and have been made entirely without any basis in fact or law. Nike knows, or should reasonably know, that the Defendants have not disclosed and do not intend to disclose or misappropriate any of Plaintiff’s trade secrets. The Complaint fails to allege a single instance of disclosure or misappropriation of a protected trade secret or any expression of intent to do so.”
As a result of their counterclaims, Dekovic, Dolce and Miner are seeking unspecified damages, attorney fees and legal costs. More to come …