Earlier this month, TechCrunch reported that Lyft, the smartphone-based car-hailing startup, accused its former Chief Operating Officer of taking sensitive company information after he left to join competitor Uber. In the Lyft Uber lawsuit Lyft claims that its computer forensics experts discovered that Travis VanderZanden downloaded confidential company information, including financial data, forecasts, and documents relating to growth strategy, to his personal Dropbox account before he left the company. Lyft also alleged that VanderZanden is soliciting Lyft employees. All of these actions, Lyft argues, are in violation of VanderZanden’s employee agreement, which includes a duty to not disclose Lyft’s confidential information even after employment ends.
VanderZanden and Uber of course deny the allegations.
What can we learn from the Lyft Uber lawsuit ?
The Lyft Uber matter is still ongoing and it will be a while before we may discover what the truth really is, but the fact pattern described by Lyft is a common one. When we talk about intellectual property, trademarks, copyrights, and patents are what comes to mind, but this fourth form of IP, trade secrets, basically any form of information with business value that the owner has made reasonable attempts to keep secret, can be just as important.
Much of the information that Lyft claims was taken included things such as lists of drivers, data and analysis of how additional fundraising would affect equity holdings, and the company’s strategies for international growth, almost certainly qualify as trade secrets. More importantly, the success of the company will turn in large part on this information and the competitive advantage that Lyft can get from it.
And, though startups often (and wrongly) think of intellectual property protection as a luxury, or at least something to sort out sometime in the future, this dispute between Lyft and Uber teaches us that IP protection is something that can and should be integrated into everyday best practices. To protect trade secrets, a company must make reasonable efforts to maintain the confidentiality of the information. This can mean everything from establishing procedures for limiting access to important information (for example, if your sales contacts are your trade secrets, setting up network permissions so that only sales people can access the information) to having well-written confidentiality agreements in place for all key employees.
So, while a company may think that they don’t have time to think about IP, the reality is that IP protection can and should be integrated to other parts of the business, including employee management and good information and workflow policies. Failure to do so may only lead to big headaches later on.