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Amazon and eBay, two of the heavyweight survivors of the dot-com meltdown, are battling in two different courts with respect to eBay’s contemplated hiring of Christopher Zyda, Amazon’s former international chief financial officer. Amazon argues that its trade secrets will be misappropriated if Zyda is permitted to sign on with eBay. EBay contends that Zyda has agreed not to disclose any of Amazon’s trade secrets, and vigorously contests Amazon’s effort to thwart Zyda’s freedom of employment. Underlying this dispute is a true business tension between the two companies, as Amazon has tried to venture into eBay’s turf in the online auction arena, and eBay has signaled an intention to move into the entertainment space of books, movies and music already occupied by Amazon. AMAZON’S ARGUMENT Christopher Zyda, according to Amazon, is the former Treasurer of Amazon.com and former Vice President and Chief Financial Officer of Amazon.com, International. Zyda recently announced his decision to depart Amazon to become the Vice President for Financial Planning and Analysis and Investor Relations for eBay. According to Amazon, throughout his three years of employment, Zyda “had high-level access to some of Amazon.com’s most confidential proprietary and trade secret information.” As a result, Zyda is “uniquely and intimately familiar with Amazon’s most confidential financial data, financial plans, cost and pricing information both for vendors and customers, and the company’s short and long-term business strategies.” Amazon asserts that when he joined the company, Zyda signed a confidentiality agreement that provided that he would not use or disclose Amazon’s confidential information. Amazon also contends that the agreement requires Zyda for a period of 18 months after his employment to refrain from working for a competing business. Amazon claims that “eBay competes directly with Amazon.com for consumers and sellers who use the Internet to purchase and sell new and used retail goods.” To allow Zyda to work for eBay as a high-level financial officer, Amazon argues, would cause a violation of the confidentiality agreement, lead to a misappropriation of Amazon’s confidential information and trade secrets, give eBay an unfair business advantage and cause Amazon a potential loss of market share. While at first blush these may seem to be fairly compelling arguments, eBay has powerful ammunition to support its hiring of Zyda. EBAY’S POSITION In response to Amazon’s statements with regard to eBay’s hiring of Zyda, eBay has attempted to assure Amazon that none of Amazon’s confidential information would be used or disclosed by Zyda during his employment at eBay. Indeed, eBay has offered to set up a program to deal specifically with this issue. Under this program, eBay would: (a) remind Zyda both orally and in writing not to use or disclose any confidential information of Amazon; (b) require Zyda to agree in writing “to take every precaution to ensure that he does not use or disclose any Amazon.com’s confidential information”; (c) retain an outside attorney with whom Zyda could consult whenever he had questions regarding his confidentiality obligations; (d) direct Zyda not to bring any materials of any kind from Amazon to be used while employed at eBay; and (e) require Zyda not to participate in the recruiting of any Amazon employees for one year. Beyond this “prophylactic” program, eBay points out that Amazon has not been able to show any actual misappropriation of Amazon confidential or trade secret information by Zyda. Thus, according to eBay, Amazon appears to be left with an “inevitable disclosure” argument. Under such an argument, actual misappropriation does not need to be proven; it suffices that the very nature of the new position of employment “inevitably” would lead to the disclosure of the prior employer’s trade secrets. The problem for Amazon, asserts eBay, is that the inevitable disclosure doctrine has not been embraced by California or Washington, the two states where the competing lawsuits are pending. EBay also disagrees with Amazon’s contention that the confidentiality agreement bars Zyda from working for a competitor company. And even if the agreement did contain such a prohibition, eBay points to California Business & Professions Code Section 16600, which provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” THE LITIGATION Concerned about perceived threatened court action by Amazon, eBay filed suit near its headquarters in San Jose, Calif. Ebay’s pending action in Santa Clara County Superior Court seeks declaratory and injunctive relief establishing that Zyda can work for eBay as planned. Following eBay’s action in San Jose, Amazon filed suit in U.S. District Court near its headquarters in Seattle. Amazon seeks damages and an injunction prohibiting Zyda to be employment with eBay, alleging that such employment would be in breach of noncompetition obligations and constitute misappropriation of trade secrets. The cases are in their early stages. U.S. District Judge Barbara Rothstein in the Western District of Washington issued a short-term temporary restraining order preventing Zyda from starting employment with eBay. Judge Rothstein may have concluded that the potential harm to Zyda of waiting several weeks to join eBay was outweighed by the possibility of eBay gaining Amazon’s trade secrets through Zyda’s employment. Judge Rothstein will have a fuller record to consider when she addresses Amazon’s preliminary injunction motion soon. It remains to be seen which court ultimately will exercise primary control over these disputes. Obviously, each party hopes that the dispute will be decided by its own “hometown” court. Time will tell. HIGH STAKES The stakes understandably are high, and neither Amazon nor eBay is pulling any punches. While Amazon may be concerned about Zyda’s employment at eBay, absent true evidence of misappropriation of trade secret or confidential information, and without the legal adoption of the inevitable disclosure doctrine, eBay very well may have the better of this fight. However, the full record needs to be developed, and one never can predict litigation outcomes with any sense of certainty. Eric J. Sinrod is a partner in the San Francisco office of Duane Morris, where he focuses on technology and litigation matters. His Web site is sinrodlaw.com and his firm’s site is Duane Morris.Mr. Sinrod may be reached by e-mail at [email protected]

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