Christou v. Beatport, LLC

10-cv-02912-RBJ-KMT
December 1, 2010
Federal Court
10th Circuit
United States District Court for the District of Colorado

In Christou v. Beatport, LLC, the United States District Court for the District of Colorado held that log-in information to a MySpace account may constitute a trade secret. Notably, the Court denied Defendant’s motion to dismiss the trade secret misappropriation claim. The Court relied on the factors laid out by the Tenth Circuit Hertz v. Luzenac Group, 576 F.3d 1103, 1115 (10th Cir. 2009), and held that whether MySpace login information including profiles, “friends”, confidential lists of personal cell phone numbers and email addresses for DJs, agents, and promoters, and customer lists in the present circumstance constitute a trade secret is a question of fact, and that Christou had alleged sufficient facts to survive the motion to dismiss.

Regal Christou
Beatport, LLC
Uniform Trade Secrets Act

Case Report

Case Report

On December 1, 2010, Regas Christou, along with Plaintiffs cumulatively known as “SOCO”, filed a nine-part complaint against defendants Beatport, Roulier, Beta, and AM Only. Defendant AM Only was later dropped from the suit. The sixth claim of the complaint was for misappropriation of trade secrets by the remaining defendants. The trial is set to begin on June 24, 2013 in the U.S. District Court for the District of Colorado in front of Judge R. Brooke Jackson. At a status conference, on February 21, 2013 Judge Jackson suggested that the parties discuss settlement discussions at their next conference.

Relevant Facts

Regas Christou, a nightclub owner, employed Bradley Roulier as a talent buyer to help Christou book DJ’s. While employed for Christou, Roulier formed “Beatport,” an “online marketplace for downloading music that catered to consumers and producers of Electronic Dance Music." Christou initially helped fund Roulier and promote the company. However, Christou claimed that Roulier eventually opened a competing club, and that Roulier used his ability to promote DJ’s success through Beatport as a tool to squeeze Christou’s clubs out of the market. Christou brought various claims against Roulier, including for multiple types of antitrust violations. The most relevant claim was for misappropriation of trade secrets, “including login information for [Christou’s] profiles on MySpace, lists of MySpace ‘friends,’ confidential lists of personal cell phone numbers and email addresses for DJs, agents, and promoters, and customer lists.”

Motion Practice and Orders

The parties’ motion practice in this litigation was so extensive that Judge Jackson was prompted to go against his general stance of “avoid[ing] artificial restrictions on briefs” and limiting all future parties’ motions and briefs to 20 pages. Amongst the motions submitted prior to the Judge’s restriction was a 22-page motion to dismiss pursuant to F.R.C.P. 12(b)(6) by Defendant Beatport. The crux of Defendant’s argument in the motion is twofold: (1) Plaintiff’s allegations that their MySpace lists and web profiles are trade secrets are insufficient under the pleading standard imposed by Bell Atlantic Corp. v. Twombly[1] ; and, (2) even if the lists constitute trade secrets, plaintiffs fail to allege defendants knew or should have know that the secrets were misappropriated, as required under C.R.S. § 7-74-101, et seq..

Defendant’s cited to the eight factors for assessing an alleged trade secret’s status, as laid out in Hertz v. Luzenac Group[2]. The defendants concluded that protecting the MySpace web profiles as trade secrets “finds no support in any of the Colorado Supply factors.” Unfortunately for Defendants, they did not analyze the factors individually. The Court evaluated the eight Colorado factors, and found that the fifth and sixth factors[3] are at the root of the trade secrets issue, and that “the trade secret [involved] is not merely [a] list of names”, as the defendant contends, but rather “their email and contact information as well as the ability to notify them and promote directly to them via their MySpace accounts.” Christou, 849 F.Supp.2d at 1075-76. The court found that “[w]hether plaintiff’s MySpace friends list is a trade secret is a question of fact. However, given the weight of the Colorado Supply factors, the Court [found] that plaintiffs have alleged sufficient facts to maintain their trade secret claim at the motion to dismiss stage.” Id. at 1076.

Defendant’s second argument: that even if the lists constitute trade secrets, plaintiffs have failed to allege that defendant Beatport misappropriated them; rather plaintiffs merely asserted “that Beatport can be held strictly liable for Mr. Roulier’s alleged misappropriation … by simply employing a person who allegedly possesses Plaintiff’s trade secrets …” was similarly rejected by the Court. Id. at 1077. The Court found that defendant was mistaken in relying on Ciena Communications, Inc. v. Nachazel[4] and refused to extend Ciena to apply to situations where there are allegations that plaintiff’s trade secrets were misappropriated by a co-founder and officer (as opposed to merely an employee) of the defendant during his employment with the defendant.

Significance of Decision

In allowing the case to proceed the court highlighted that trades secrets law is about balancing and there are often issues of disputed fact that must be resolved by the finder of fact, which cannot be decided on a motion to dismiss. Additionally, the Court’s order extends the realm of possible trade secrets by holding that consumer lists on social media sites could indeed amount to trade secrets. If the final resolution of this case holds that the MySpace lists are in fact protectable trade secrets it would be extending the realm of trade secrets to consumer lists that are essentially entirely within the public eye. Additionally, a decision to categorize the lists as trade secrets would imply that the real issue in the case is that fact that Beatport used Christou’s password to access the list, because presumably Beatport would be free to simply mimic the consumer list by requesting the same “friends”, especially since the “friends” list is available for public view.

[1] 550 U.S. 544 (2007)

[2] 576 F.3d 1103, 1115 (10th Cir. 2009) (citing Colorado Supply Co. v. Stewart, 797 P.2d 1303, 1306 (Colo. App. 1990))

[3] “(5) whether customer information could be readily obtained from public directories; (6) whether customer information is readily ascertainable from sources outside the owner's business…” Christou v. Beatport, LLC, 849 F. Supp. 2d 1055, 1075 (D. Colo. 2012) (citing Hertz v. Luzenac Group, 576 F.3d 1103, 1115 (10th Cir. 2009) (citing Colorado Supply Co. v. Stewart, 797 P.2d 1303, 1306 (Colo. App. 1990)).

[4] No. 09-CV-02845-MSK-MJW, 2010 WL 3489915 (D. Colo. Aug. 31, 2010)