On Thursday, a jury in an Oakland federal court awarded LivePerson Inc more than $30 million and found call center 7.ai Inc guilty of unfair competition and misuse of trade secrets related to LivePerson’s clients (Capital One, Sears, and Optus).
What is LivePerson and what does it do?
Simply put, LivePerson offers online engagement technology, in the form of chatbots, used by corporate clients to add them to their website to field questions, reduce customer support costs and gather interaction data. They are best known as the developer of the Conversational Cloud, a software platform that allows consumers to message with brands.
How did it all start?
In the case filed in 2014, the accuser wrote a complaint in which they described how their collaboration with 24/7 went bad. Initially, 24/7 offered contract call center employees to businesses when it required a human touch. Afterward, they branched out into engagement technology, and that’s how they became a competitor to LivePerson, and further on the lawsuit.
Back in 2006, thanks to less product overlap, the companies entered into a contractual relationship, with confidentiality and non-competition clauses, to provide their business customers access to human support and automated systems. Therefore, 24/7 was supposed to co-market LivePerson by offering agents to future clients, and that is why the accuser gave 24/7 access to its confidential technology!
In the following years, 24/7 learned about competitor’s technology for live interaction and also their methods for implementing these systems on websites. Then, roughly around 2012, says the complaint, 24/7 started to abuse its insider access to copy LivePerson’s technology and information related to Capital One, Optus, and Sears.
However, 24/7 claimed they disrupted competitor technology maliciously on customers’ websites and misrepresented data related to competitors’ services, technology, and system performance. All that because 24/7 was trying to promote its own competing service and “[injected] spyware into LivePerson’s databases, through unauthorized use of LivePerson’s copyrighted code, to gather information regarding the operation of LivePerson technology-presumably to reverse engineer LivePerson’s technology.“
After developing a competing version of the competitor’s live-interaction technology, 24/7 is alleged to sabotage the LivePerson code by installing its rival system on the websites of mutual clients.
The complaint states the following:
“Once 24/7’s live interaction software has been installed on a website that also contains LivePerson’s technology, it appears that 24/7 improperly injects spyware into LivePerson’s systems</span>. <span class=”has-inline-color has-black-color”>24/7 spyware appears expressly designed to capture confidential and proprietary information and data regarding LivePerson’s technology and client relationships.”
It is said that the injected code has derailed competitor’s chatbots by removing the “chat” button that is necessary to open a chat window or by preventing live-chat sessions from launching.
The accuser affirms that 24/7 used its spyware to reverse its engineer technology, copy it, and intervene with its client relationships. According to the complaint, clients told the competitor’s staff that 24/7 deprecating its partner and that the accuser lost major customers due to the whisper campaign.
However, after seven years of legal wrangling, the jury found the evidence credible and awarded the accuser $6.74M in compensatory damages and $29.59M in punitive damages.
What happens next?
A second trial is yet to be scheduled in the case over trade secrets related to another LivePerson customer, W.W. Grainger Inc. However, 24/7 has separately sued its competitor for allegedly infringing several of its patents!
Final thoughts after the lawsuit
A partner at Kirkland & Ellis, Sharre Lotfollahi, celebrated the decision:
“This was a terrific win for our client LivePerson, who field this case seven years ago to defend its intellectual property rights against a competitor. It confirms that the significant investments LivePerson has made in its cutting edge online customer engagement technology are valuable and protectable intellectual property and that companies that do not respect other’s intellectual property rights will be held accountable.”
She also stated that:
“We had a very engaged jury who paid close attention throughout the month-long trial and we are pleased that they agreed to our client LivePerson that its technology had been stolen by 24/7. The jury awarded significant punitive damages for 24/7’ss conduct.”