SAN FRANCISCO – Zynga Inc. has settled its trade secrets case against a former executive and online gaming rival Kixeye, ending a closely watched legal battle that focused employers in Silicon Valley and nationwide on the impact of new technologies like cloud-based storage devices on commercial secrets.
Company representatives and their attorneys declined to discuss details of the settlement, which was noticed earlier this week, but provided the following joint statement: "Zynga Inc. and KIXEYE Inc. have reached a mutually agreeable settlement of their litigation involving Alan Patmore in San Francisco Superior Court."
Patmore, Zynga's ex-general manager of 'Cityville', offered a mea culpa as part of the settlement.
"I accept responsibility for making a serious mistake by copying and taking Zynga confidential information when I resigned from Zynga," said Patmore in a statement released Wednesday. "I understand the consequences of my actions, and I sincerely apologize to Zynga and my former colleagues."
Zynga accused Patmore of stealing 750 files of "non-public, commercially valuable information" by downloading them from the online file storage site DropBox. Filed in October by Paul Hastings partner Bradford Newman, Zynga v. Patmore, 12-525099 captured attention in Silicon Valley, where trade secret theft is a large concern and allegations fly among competitors.
Zynga alleged that Kixeye, Patmore's new employer, had encouraged him to download Zynga's files. Among the files Zynga accused Patmore of downloading to a Kixeye laptop were some of its "most valuable and confidential information," including monetization plans, unreleased game designs, revenue information and strategies.
Newman scored a temporary restraining order from Judge Harold Kahn early in the case prohibiting Patmore from "engaging in any activities related to the planning, design or development of online game applications that in any way involve the use or disclosure of Zynga's trade secrets or other confidential or proprietary data."
Patmore is represented by Orrick, Herrington & Sutcliffe partner Robert Shwarts. Goodwin Procter partner Kristen Dumont led Kixeye's defense.
Dumont's answer to Zynga's first amended complaint last April gave a snapshot of the bitter rivalry between the two San Francisco social gaming companies.
"Kixeye has no interest in whatever 'trade secrets' Zynga has been using to run its business into the ground and has never solicited or used any trade secret material from Zynga," Dumont wrote. "Zynga is a failing company with a business model that went stale long ago … (Its) user base is shrinking, and along with it, Zynga's profits are dwindling."
But Kixeye and Patmore suffered a series of tactical losses that likely drove them to settle, according to Seyfarth Shaw partner Robert Milligan, who has followed the case.
In addition to a failed demurrer, Kixeye's recent attempts to delay discovery had faltered. And Kixeye's harshly-worded cross complaint against Zynga backfired earlier this year when Judge Leslie Nichols struck the complaint and made Kixeye pay $125,000 in attorney fees to Zynga.
Nichols took Kixeye's and Patmore's lawyers to task. "I'm just looking at the pleadings," said Nichols, according to a transcript. "This talks about Zynga is a failing company. It's just page after page of the kind of stuff I read in the business press, not in courts of law."
Milligan, who chairs a trade secret committee of the American Bar Association's Intellectual Property Section, said that it appeared Zynga had gained the upper hand and Kixeye needed to cut its losses.
"They were looking at a lot of discovery to get the case ready for trial," he said. "It didn't look like Kixeye had a lot of leverage."
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