Stealing Signs, Bases and, Now, Secrets

On March 8, 2015, we explored trade secrets’ role in professional sports and left off with:

So, what is next? Will professional sports teams take sufficient protective measures to protect their CVI [competitively valuable information] as trade secrets? They should. Will employee mobility — part of the fabric of all professional sports – be too large an obstacle for teams to develop and leverage their trade secrets? It should not be. Will teams enforce or otherwise leverage their trade secrets through litigation (e.g., against a former employee and his new employer) or a license (e.g., with a team in another sport)? Time will tell. For now, and at the very least, astute professional sports teams will assess their potential trade secret portfolios and, ultimately, make sure they are doing all they can to succeed on and off the field.

Now, thanks to the St. Louis Cardinals and Houston Astros, we know what is next when it comes to professional sports and trade secrets. It is exactly what happens in the real world.

In the real world, first a company invests time, money and effort in developing competitively valuable information (CVI), which may constitute trade secrets. Then, the company takes some steps to protect the CVI. Next is misappropriation (i.e., theft), sometimes via a cyberattack, though often by an insider, such as a dishonest employee. That leads to the uh-oh moment and varying degrees of scrambling. Questions arise. How did this happen? What was actually stolen? Were sufficient protective measures taken to protect the potential trade secrets? The new wrinkle here is a slew of sports media talking heads and, in some cases, mainstream media serving up reports and opinions that, unfortunately, confuse and conflate issues far more than they educate.

My current, key take-aways from the Astros/Cardinals conflict are:

(1) CVI and trade secrets can be critical assets for sports franchises. Yes, critical. If there is any doubt about that, then consider this: a thief, especially a thief with industry acumen, generally steals only valuable property. After all, the thief’s main goals (other than getting away) are (a) direct financial gain, (b) indirect financial gain by weakening the target, often a competitor, or (c) some combination of those direct and indirect gains.
(2) CVI and trade secrets deserve serious attention from their owner and competent intellectual property counsel who specialize in trade secrets. That attention may have avoided, or seriously mitigated, this entire Astros/Cardinals conflict.
(3) Part of the attention referenced in take-away no. 2 should focus on the corporate culture. Here, it appears that neither the Cardinals nor the Astros have a true pro-trade secret corporate culture. Such a culture should focus on properly accounting for internal trade secrets and respecting external (i.e., others’) trade secrets.
(4) Some specific questions going forward:
a. What did the Cardinals do to protect their Redbird platform and corresponding CVI and potential trade secrets?
b. Is the Astros’ Ground Control platform a copy of or substantially derived from the Cardinals’ Redbird platform? According to The New York Times, the two platforms are “similar.” (Michael S. Schmidt, NYT, “Cardinals Investigated for Hacking Into Astros’ Database,” June 16, 2015.) The meaning of “similar” is unclear. As it is, perhaps the Astros have misappropriated certain CVI or trade secrets owned by the Cardinals.
c. How do the Cardinals handle off-boarding of employees, such as Jeff Luhnow and other front office personnel? Likewise, how do the Astros handle on-boarding of new employees? Keeping your own trade secrets in-house and not taking another’s trade secrets in-house are important issues.
d. Does any team, including the Astros and Cardinals, utilize confidentiality or non-disclosure agreements with any of its employees? At least for non-athletes, they probably should.
e. How do the Astros and Cardinals manage network and file access and, in particular, passwords?
f. How do the Astros otherwise protect their CVI and potential trade secrets? The New York Times reported that the Astros’ CVI was “closely guarded.” (Schmidt, “Cardinals Investigated for Hacking Into Astros’ Database,” June 16, 2015.) That conclusion seems premature.

In sum, the criminal investigation by the FBI and Department of Justice is just one aspect of the Astros/Cardinals CVI conflict. No matter what the result of that investigation is, other sports franchises – in all leagues – would be well-served by taking advantage of this wake-up call. Teams, take a fresh look at your CVI and potential trade secrets!