from the not-how-it-works dept
Back in 2013, we wrote about yet another case of a failed entrepreneur overvaluing his own “idea” and thinking that a much more successful company “stole” that idea. In this case, the successful company was Pinterest and the guy, Theodore Schroeder, insisted that Pinterest ripped off key elements from his sites that you never heard of: RendezVoo and Skoopwire. Both of those sites were actually nothing like Pinterest, but did have a few similar elements, such as infinite scrolling (which a few other sites had before RendezVoo) and the concept of “boards.” The key to Schroeder’s claim was a guy named Ben Cohen, an angel investor in NY. He had become a partner with Schroeder in RendezVoo and Skoopwire (and may have provided the spark for Skoopwire) and was listed as the Chairman of each. Well after Skoopwire/RendezVoo fizzled out due to a near total lack of interest (and some internal disputes between Cohen and Schroeder), Cohen became the first investor in Pinterest. Schroeder then insisted that Cohen took all of Schroeder’s good ideas from his two services, and gave them to Pinterest. Back in 2013, we expected the case to be tossed out of court pretty quickly, as it was hard to see how any of the “copied” concepts were even remotely protectable.
Last year, a NY court dismissed all the claims against Pinterest, and nearly all of the claims against Cohen, leaving only the possibility of “misappropriation of skills and expenditure” and “promissory estoppel” (because of an angry email Cohen had sent to Schroeder saying that he had no desire to profit from Schroeder’s work — which Schroeder claims equaled a legal promise not to pursue any such idea). The ruling was appealed, and last week, NY’s Supreme Court reiterated that the charges against Pinterest are a joke and have been dismissed. However, somewhat surprisingly, it reverses some of the dismissed charges against Cohen, arguing that he may have breached his fiduciary duties to RendezVoo/Skoopwire — but almost all of that is due to some fairly sloppy decision making, in that after those operations fizzled out, they never officially agreed to shut them down or for Cohen to “resign.” Thus, he may have still had a fiduciary responsibility to those companies, though it’s unclear if he really violated them. That part comes down more to a sort of contract issue and the fact that Cohen and Schroeder both appeared to be a bit cavalier when it came to the paperwork for working together (which, frankly, is not that unusual in the early days of startups).
But, the court notes that any attempt to extend the potential problems between Schroeder and Cohen to Pinterest fail, because it all assumes some level of knowledge by Pinterest that there is no evidence to support.
Plaintiffs failed to assert with the requisite particularity facts alleging that Pinterest had actual knowledge of Cohen?s alleged breach and knowingly participated in it. The complaint contains no specific allegation that Pinterest was actually aware of Cohen?s involvement with Rendezvoo and Skoop Media, let alone that he was a fiduciary of the companies. That omission is fatal to this cause of action….
Plaintiffs rely on a number of statements in the complaint to support their argument that Pinterest had knowledge of Cohen?s breach. For example, the complaint states that Pinterest?s founders did not come up with the idea behind the Pinterest website themselves, but received it from Cohen, knowing that the idea was not Cohen?s own. The complaint further states that Cohen and Pinterest?s founders agreed that Cohen would share the idea with them and provide capital. Neither of these allegations, however, fairly suggests that Pinterest?s founders actually knew that Cohen was a fiduciary or that his passing along the idea breached a fiduciary obligation. In sum, the complaint?s conclusory allegations are insufficient to sustain the aiding and abetting cause of action…
Similarly, the claims of “unjust enrichment” are tossed out as well for similar reasons:
Here, the complaint contains no facts showing that plaintiffs had any relationship or connection to Pinterest, let alone the ?sufficiently close relationship? necessary to sustain this claim…. Plaintiffs do not allege that Schroeder, or either of the corporate plaintiffs, had any contact with Pinterest or its founders…. The complaint alleges only a relationship between plaintiffs and Cohen, and a separate relationship between Cohen and Pinterest, which is ?too attenuated? …, and insufficient to ?have caused reliance or inducement?
Things do get a little interesting when it comes to “trade secrets” (a very problematic area of law that is set to expand…). Pinterest is let off the hook, but Cohen is not.
These allegations are sufficient, for pleading purposes, to satisfy the first element of a misappropriation of trade secrets claim, namely, that plaintiffs possessed a trade secret…. Plaintiffs have also pleaded facts supporting the second element ? that Cohen used the trade secrets in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means…. As noted earlier, plaintiffs allege that Cohen acquired the confidential information while he was a fiduciary of Rendezvoo and Skoop Media, and that he purposely caused the project to deadlock so that he could steal that information.
Plaintiffs, however, cannot prevail on their trade secret claim against Pinterest. The complaint does not allege that plaintiffs entered into any agreement with Pinterest or had any confidential relationship with the company or its founders. Indeed, as noted earlier, there is no allegation that Schroeder, or either of the corporate plaintiffs, had any contact whatsoever with Pinterest. Nor do plaintiffs allege that Pinterest obtained the trade secrets by improper means. In fact, the complaint states that Cohen voluntarily gave Pinterest the alleged trade secrets, not that Pinterest employed any improper means to acquire them. Plaintiffs point only to the allegation that Pinterest?s founders knew that the idea given to them by Cohen was not Cohen?s own. This allegation, however, does not give rise to an inference that Pinterest used improper means to obtain the information.
The court, thankfully, goes on to note that while Cohen may be on the hook for the trade secret issue, it should be limited narrowly to “confidential information” and not silly things like “infinite scroll.” The ruling notes that the look and feel issues raised in the initial complaint about similarities between Schroeder’s sites and Pinterest are not trade secrets because they were in the public domain.
Here, the complaint identifies a number of similar features in both Pinterest.com and the second version of Rendezvoo.com. As noted earlier, this version of the Rendezvoo website was introduced in August 2006, and had over 5,000 users by January 2007. The alleged misappropriation of trade secrets took place in 2009, several years after the Rendezvoo website entered the public domain. Thus, to the extent the features identified by plaintiffs were readily ascertainable from the publicly-available Rendezvoo website, they are not protectable trade secrets
In the end, Pinterest is spared, but Cohen may still be in court for a while over this — which is mostly stupid. The whole thing does seem pretty silly all around though. As we’ve said over and over again, the “idea” for a startup is rarely the important part. It’s very much about the execution. Getting jealous because someone executed better than you on a similar idea (and here it’s barely similar) is just silly.