Startup Accuses Apple of Stealing Trade Secrets

Startup Accuses Apple of Stealing Trade Secrets

SAN FRANCISCO — Lawyers for San Francisco startup Hooked Media Group Inc. are taking on Apple Inc. over a scrapped acquisition deal they say all but destroyed the startup.

Hooked Media, a mobile app search and recommendation platform founded in 2008, entered negotiations with Apple in May 2013. At first it looked like a great deal for both sides, according to Hooked Media’s lawyers at Sideman & Bancroft. The venture-backed startup stood to make $60 million, and Apple was in the market for technology that would provide its customers with personalized app recommendations, according to the complaint filed last week in Santa Clara County Superior Court.

But when negotiations soured, Hooked Media’s then-chief technology officer, Chandrasekar Venkataraman, conspired with Apple to steal the startup’s trade secrets and raid its engineering team, Hooked Media’s lawyers wrote. Venkataraman is also a defendant in the suit.

“Mr. Venkataraman capped off the scheme by leaving for Apple in the middle of the night, taking copies of Hooked Media’s intellectual property with him, and deleting and/or otherwise removing computer files from Hooked Media’s computer systems that were essential for Hooked Media to operate and to continue to do business with competitors of Apple, like HTC,” the complaint states.

Attorneys for Apple and Venkataraman have not yet entered an appearance. Apple did not immediately respond to a request for comment Monday.

When Venkataraman left Hooked Media, the company was bringing in about $1 million per month in revenue, according to the complaint. On his way out the door, the plaintiff’s attorneys allege Venkataraman deleted several vital email folders from the company’s server, copied the company’s code base to a personal storage account, created new user names to access the code base, and took with him his desktop and laptop computers containing additional Hooked Media trade secrets.

Apple and Hooked Media did not sign a nondisclosure agreement, but the startup’s lawyers say Apple promised all information shared during negotiations would remain confidential.

Throughout the acquisition talks, the plaintiff’s attorneys said Venkataraman, one of Hooked Media’s first employees, had unauthorized cellphone conversations with Venkat Sundaranatha, the senior engineering manager leading the talks for Apple. Venkataraman, who had previously worked with Sundaranatha, attempted to sabotage acquisition negotiations between Hooked Media and any company other than Apple, Sideman & Bancroft attorneys said.

“By August 2013, Mr. Venkataraman had become no more than an extension of Mr. Sundaranatha and Apple, collecting paychecks from Hooked Media, but working in Apple’s interest rather than Hooked Media’s,” the complaint states.

In August, Apple informed Hooked Media it was no longer interested in an acquisition. Instead, it wanted to hire the startup’s engineering team in exchange for $4.5 million, the amount of capital Hooked Media had raised from investors at Altos Ventures and U.S. Venture Partners, the complaint states. The following month, Apple reneged on that offer and instead offered Hooked Media a finder’s fee of 30 percent of each engineer’s salary, according to the complaint. Ultimately, the finder’s fee dropped to 15 percent for a total of $45,000.

In November, two Hooked Media engineers defected to Apple, and Venkataraman followed in December.

“It appears [Apple] thought they were above the law and really were very calculating in what they did,” Sideman & Bancroft partner Zachary Alinder said. “I don’t think they were incredibly concerned frankly for the well-being of Hooked Media.”

Contact the reporter at mkendall@alm.com.

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