Attorney Steve® Trade Secret Essentials - Zoominfo lawsuit!

Introduction

According to wikipedia:

"ZoomInfo Technologies Inc. is a software and data company which provides data for companies and business individuals. Their main product is a commercial search-engine, specialized in contact and business information. From internet and other sources, the company collects contact and other information about individuals, companies and other business entities, such as departments. They maintain profiles for the subjects and make these available to their clients, as a service and for a fee."

We have recently seen them bring a trade secrets lawsuit.  This blog will discuss one such case.

Sample allegations

Here are some of the allegations made in the complaint in the Colorado district court:

ZoomInfo curates a highly accurate database of information used by businesses worldwide in connection with their business-to-business sales, marketing, and recruiting. ZoomInfo invests millions of dollars annually to build and maintain its database and associated intellectual property and to constantly verify, update, and expand upon the information it provides to customers. To use this database, ZoomInfo's customers pay tens and sometimes hundreds of thousands of dollars in subscription fees.

The success of ZoomInfo's business model depends on a customer's faith on the continued availability—and exclusivity—of ZoomInfo's database. Instead of paying for a subscription like other customers, CarpeDatum gained unauthorized access to ZoomInfo's database for years, thereby improperly acquiring and gaining knowledge of the data contained therein. CarpeDatum then used this improperly acquired data to market and promote its products and services. ZoomInfo therefore brings this suit to protect its highly valuable intellectual property, recover its damages, and ensure fairness for itself and for its customers. 

A. ZoomInfo's Platform.

5. ZoomInfo provides business-to-business marketing data including business contact data, firmographic information, and other competitive intelligence. It delivers this data to paying subscribers via a password-secured, online graphical user interface. ZoomInfo's subscribers gain access to its database of marketing information profiling businesses in the United States and across the globe.

6. ZoomInfo has invested, and continues to invest, tens of millions of dollars to develop and maintain the infrastructure, content, and quality of its database. To deliver timely and comprehensive data to ZoomInfo's clients, ZoomInfo employs hundreds of research analysts focused on building, managing, and updating ZoomInfo's database. ZoomInfo expends substantial labor, time, and resources to collect, organize, and disseminate the information in its database. In total, ZoomInfo employs thousands of people, and has made significant investment in developing and purchasing software, hardware, and other equipment to continuously update and support the accuracy and comprehensiveness of its database. ZoomInfo's database displays the selection, arrangement, orchestration, compilation, and presentation of the organizational charts, contacts, and other information collected and assembled by ZoomInfo's analysts

7. ZoomInfo licenses access to its database to thousands of companies. ZoomInfo's database is valuable to companies like CarpeDatum because they use the detailed information collected by ZoomInfo to market their own products and services. 8. Indeed, CarpeDatum was a customer until December 2019. 9. The database's value depends on its exclusivity. To protect the database's value, ZoomInfo has implemented reasonable security measures. For example, access to ZoomInfo's database requires a password, and only users that have signed restrictive license agreements receive this password. ZoomInfo also uses mail monitoring and list protection to secure the integrity of its database.

B. CarpeDatum's Wrongful Conduct.

9. Instead of acquiring a license from ZoomInfo to access the proprietary and confidential subscriber-only portions of the platform, CarpeDatum gained unauthorized access to ZoomInfo's proprietary information by using login credentials issued to existing ZoomInfo customers. CarpeDatum thus acquired and gained knowledge of ZoomInfo's proprietary data without using proper means. CarpeDatum then used this improperly acquired data to market and promote its products and services. This conduct presents a critical threat to ZoomInfo: if everyone did what CarpeDatum has done, ZoomInfo could not survive as a business, and the resource ZoomInfo provides to its customers would be completely lost. Through its actions, CarpeDatum sought to enjoy a “free ride” off of the license fees paid by ZoomInfo's legitimate customers. 10. Beginning in February 2020, CarpeDatum gained unauthorized access to ZoomInfo's database. CarpeDatum's own managing partner has conducted downloads of ZoomInfo data using logins from another customer's account. These actions allowed CarpeDatum to acquire and gain knowledge of ZoomInfo's proprietary database using improper means. On information and belief, CarpeDatum used and continues to use the improperly acquired data to market and promote its products and services.

11. CarpeDatum acted knowingly, intentionally, and willfully in accessing and using ZoomInfo's proprietary information without authorization and without compensating ZoomInfo. CarpeDatum knew that its actions were unauthorized because it was a customer until December 2019. CarpeDatum therefore intentionally and wrongfully profited from its unauthorized use of ZoomInfo's proprietary information, including, but not limited to, by reducing the time, effort, and expense associated with identifying and contacting potential new customers and business opportunities.

12. CarpeDatum knew that ZoomInfo's data was confidential and proprietary and subject to restrictive license agreements. Even so, CarpeDatum knowingly accessed and acquired knowledge of ZoomInfo's data without any license or authorization to do so. On information and belief, CarpeDatum took these actions to profit from ZoomInfo's data without paying ZoomInfo. 13. At all relevant times, CarpeDatum had a duty to train and supervise the conduct of its employees and agents acting on its behalf. CarpeDatum breached this duty in two ways:

(a) by failing to train and monitor its employees and agents adequately;

and

(b) by failing to have appropriate policies in place regarding unauthorized access to computer systems, communication, storage networks, and copyrighted works and trade secrets, and/or failing to enforce such policies.

Causes of action being pursued.

--Theft of Trade Secrets – 18 U.S.C. § 1832, et seq.

--Misappropriation of Trade Secrets – C.R.S. § 7-74-102

--Circumvention of Copyright Protection Systems 17 U.S.C. §§ 1201, 1203

17. The compilation of information in ZoomInfo's database derives independent economic value from not being generally known to, and not being readily ascertainable through proper means by, those who are not licensed by ZoomInfo to access the database. Specifically, ZoomInfo works as a subscriber-based platform; to gain access to ZoomInfo's collection of information, subscribers must pay a fee. Therefore, ZoomInfo's very business model depends on the secrecy and independent value of its information. If subscribers could get ZoomInfo's information elsewhere for free or by paying less, they would. Non-licensees, such as CarpeDatum, obtain economic value from the acquisition, disclosure, or use of the information in ZoomInfo's database.

18. ZoomInfo has taken reasonable measures to protect and keep the information in its database secret. These measures include limiting access to those customers who agree to the terms of access in the licensing agreement, and requiring password authentication to access the database through its secure online portal. ZoomInfo also monitors access to the database and use of the information to further ensure its security.

19. CarpeDatum used improper means, including theft, to obtain access to, and acquire information from, ZoomInfo's database. CarpeDatum knew, or had reason to know, at the time it obtained and at the times it used ZoomInfo's information, that this information was obtained from persons or entities owing ZoomInfo a duty to maintain its secrecy.

20. CarpeDatum received and possessed information from ZoomInfo's proprietary database that CarpeDatum knew to have been converted without authorization. Case 1:20-cv-03553-STV Document 1 Filed 12/02/20 USDC Colorado Page 6 of 11 7

21. CarpeDatum willfully and maliciously misappropriated ZoomInfo's trade secrets by acquiring and using the information contained in ZoomInfo's proprietary computer systems for CarpeDatum's financial gain without authorization.

22. CarpeDatum's actions have damaged ZoomInfo through the lost opportunity to realize licensing revenue and the diminution of the market value of its proprietary information. On information and belief, CarpeDatum has been unjustly enriched by the use of valuable marketing and sales information without paying compensation, and through the consummation of business transactions that would not have occurred without use of the stolen information. ZoomInfo would, in the alternative, be entitled to a reasonable royalty for CarpeDatum's use of the information.

23. CarpeDatum is liable to ZoomInfo for damages for ZoomInfo's actual losses and CarpeDatum's unjust enrichment, in an amount to be proven at trial, or for a reasonable royalty pursuant to 18 U.S.C. § 1836(b)(3)(B). ZoomInfo is entitled to an injunction preventing CarpeDatum from continuing to acquire, possess, or use information obtained from ZoomInfo's database, or requiring CarpeDatum to pay a reasonable royalty for future acquisition or use. Finally, ZoomInfo is entitled to exemplary damages under 18 U.S.C. § 1836(b)(3)(C), and to its reasonable attorneys' fees under 18 U.S.C. § 1836(b)(3)(D).

We will keep an eye on this case and see how it progresses.  Zoominfo bears the burden of proof.

Contact a California Trade Secret Lawyer

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