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Afilias wins $10m judgment in Architelos “trade secrets” case

Kevin Murphy, August 25, 2015, 15:12:03 (UTC), Domain Services

Afilias has won a $10 million verdict against domain security startup Architelos, over claims its flagship NameSentry abuse monitoring service was created using stolen trade secrets.
A jury in Virginia today handed Afilias $5 million for “misappropriation of trade secrets”, $2.5 million for “conversion” and another $2.5 million for “civil conspiracy”.
The jury found (pdf) in favor of Architelos on claims of business conspiracy and tortious interference with contractual relations, however.
Ten million dollars is a hell of a lot of cash for Architelos, which reportedly said in court that it has only made $300,000 from NameSentry.
If that’s true, I seriously doubt the four-year-old, three-person company has even made $10 million in revenue to date, never mind having enough cash in the bank to cover the judgment.
“We’re disappointed in the jury’s verdict and we plan to address it in some post-trial motions,” CEO Alexa Raad told DI.
The lawsuit was filed in January, but it has not been widely reported on and I only found out about its existence today.
The original complaint (pdf) alleged that three Architelos employees/contractors, including CTO Michael Young, were previously employees or contractors of Afilias and worked on the company’s own abuse tools.
It claimed that these employees took trade secrets with them when they joined Architelos, and used them to build NameSentry, which enables TLD registries to monitor and remediate abuse in their zones.
Architelos denied the claims, saying in its March answer (pdf) that Afilias was simply trying to disrupt its business by casting doubt over the ownership of its IP.
That doubt has certainly been cast, though the jury verdict says nothing about transferring Architelos’ patents to Afilias.
The $5 million portion of the verdict deals with Afilias’ claim that Architelos misappropriated trade secrets — ie that Young and others took work they did for Afilias and used it to build a product that could compete with something Afilias had been building.
The other two counts that went against Architelos basically cover the same actions by Architelos employees.
The company may be able to get the amount of the judgment lowered in post-trial, or even get the jury verdict overturned, so it’s not necessarily curtains yet. But Architelos certainly has a mountain to climb.

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Comments (3)

  1. Richard Funden says:
    August 25, 2015 at 4:07 pm

    Ah, gotta love jury trials… So arbitrary, every day in court is a gamble…

    Reply
  2. Rubens Kuhl says:
    August 25, 2015 at 6:08 pm

    $10 Million was the amount demanded in the filing, so jury just went with that number.

    Reply
  3. John Berryhill says:
    August 26, 2015 at 12:29 am

    I thought the US Federal Rules of Civil Procedure required any civil lawsuit brought by a registry to name Daniel Negari as a defendant.
    This suit is clearly invalid for violating that rule.

    Reply

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