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By Kyle Jahner
A cryptocollectibles tech company lost its preliminary bid to block a competitor accused of stealing its trade secrets by releasing characters resembling NBA star Stephen Curry in a blockchain-based CryptoKitties virtual game.
The U.S. District Court for the Southern District of California ruled that Founder Starcoin Inc. failed to show that a preliminary injunction would prevent irreparable damage to its business plans, or that its trade secrets lawsuit would be successful.
Starcoin had hoped to bar use of the ‘CurryKitties’ or any other embodiment of Starcoin trade secrets by Dapper Labs, a subsidiary of defendant Axiom Zen.
Starcoin defined its purportedly stolen trade secret in two ways, and both ways failed to qualify as a trade secret, the court ruled. Licensing celebrity images to a product is a “well-known business practice,” and nothing in Starcoin’s presentation disclosed concepts that were not publicly known nor obvious applications of licensing images to a product like cryptocurrencies.
The court said Axiom developed the idea to associate celebrities with CryptoKitties before its February interactions with Starcoin. Axiom had also initiated in January discussions that ultimately led to its licensing negotiations over use of Curry’s likeness with Appmoji. The judge also said the fact that Appmoji did not actually have such rights did not speak to the trade secret issue.
The court rejected Starcoin’s claims of imminent damage to business reputation and goodwill since it could no longer be first to market. Starcoin has no product, customers, celebrity partnerships nor any established reputation and failed to quantify its injury in any way, the court said.
Axiom had been developing CryptoKitties, a game built on the Etherum blockchain that lets users “securely buy, sell, trade and breed genetically unique virtual cats.” Axiom publicly announced plans to match celebrities to CryptoKitties in October 2017.
Starcoin reached out to collaborate with Axiom in February 2018, and the parties signed a nondisclosure agreement. Starcoin disclosed to Axiom its plan to sell digital collectible tokens for celebrities that could be sold. The plan would have Starcoin profiting off the initial offering and a cut of later trades as the token’s value fluctuated based on the celebrity’s perceived value. Curry and other celebrities were featured in Starcoin’s presentation.
Axiom put the conversation on hold later that month, and Dapper Labs released CurryKitties in May, prompting the lawsuit. Dapper Labs later pulled CurryKittes from its website because the company from which it had licensed Curry’s likeness, Appmoji, did not have publicity rights.
Judge Jannis L. Sammartino issued the decision July 9.
Case is Founder Starcoin, Inc. v. Launch Labs Inc. d/b/a Axiom Zen, Bankr. S.D. Cal., No. 18-cv-00972, Order denying preliminary injunction 7/9/18
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