A Utah software company is cautiously celebrating the end of a six-year legal battle against a Mastercard subsidiary — a fight that company executives say a less “lucky” company may not have survived.
Utah District Court Judge Jill N. Parrish dismissed the last of Applied Predictive Technologies’ (APT) claims of patent infringement and trade secrets violations against Salt Lake City-based MarketDial, ruling none of APT’s claims specify which trade secrets, exactly, MarketDial allegedly stole. APT, which is owned by Mastercard, presented extensive facts about its business and its offerings, Parrish ruled, but did not distinguish which were protected trade secrets.
“Simply stated, this court will not do APT’s job for it by mining its trade secrets from the raw materials, dusting off known information and techniques, and preparing its case for submission to the jury,” Parrish wrote in her 39-page order, which was unsealed and filed in the public record Aug. 12. The case was dismissed in March. (The order was resealed Aug. 26, but not before being downloaded and distributed on various websites.)
MarketDial executives have denied the claims all along. The company sells software that allows retailers to test and measure any changes they might want to implement, like introducing a new product or changing the price of merchandise. APT was the first to offer such software, according to its lawsuit — and, until MarketDial, the only. MarketDial executives said the purpose of APT’s litigation was to keep it that way.
MarketDial is David, the company’s executives say, while APT is Goliath.
“From a business perspective, it’s been incredibly damaging,” said Greg Osborne, vice president of operations and general counsel. “The sad thing is, it’s kind of a case study for if you have a monopoly in a market, it is not only smart, but entirely rational to bring a lawsuit like this, even if the claims don’t survive legal scrutiny.”
Osborne said fighting the lawsuit took a lot of time and money that other companies might not have. MarketDial has had to lay off employees, Osborne said, because of the cost of legal fees.
“You know, we’re a Utah company that’s mostly backed by Utah investors, that almost exclusively hires Utah employees,” he said. “There’s a real personal cost here.”
It’s not completely over yet. APT has filed an appeal and maintains its trade secrets were “wrongly taken by MarketDial,” a spokesperson said in a written statement.
“We are disappointed in the trial court’s summary judgment and have filed an appeal to protect our intellectual property,” the spokesperson said.
APT’s lead attorney did not respond to a request for comment on the court’s decision.
(Bethany Baker | The Salt Lake Tribune) MarketDial Vice President of Operations and general counsel Greg Osborne stands for a portrait at their offices in Salt Lake City on Tuesday, Sept. 3, 2024. A federal judge in Utah dismissed the final charges of a six-year legal battle brought by a Mastercard subsidiary that claimed the startup stole trade secrets.
What’s in a trade secret?
APT first sued MarketDial and its co-founder, Johnny Stoddard, in June 2018 in Delaware court, according to the court docket. It was right after MarketDial won its first big client, Osborne said — a contract for which APT had also bid.
The case moved to Utah in 2019; co-founder and CEO Morgan Davis was added as a defendant in 2021.
Stoddard and Davis had both been consultants for different firms that worked with APT, the lawsuit claimed, and were privy to “confidential information.” Stoddard had evaluated APT’s software to determine whether to recommend it to his consulting clients, according to court documents.
When they joined forces to create MarketDial, Stoddard and Davis used that private information, APT alleged in the lawsuit, to build their business. MarketDial adapted features APT created, such as customized feeds that use client data to offer specific analyses, and then sold those features to clients, they argued.
APT’s software took 16 years and lots of money to develop and refine, the company argued, and could not have been replicated without proprietary, protected knowledge.
MarketDial responded that any information Stoddard and Davis may have learned was gleaned through “high-level marketing documents” and was not, in fact, confidential.
And, as MarketDial argued and the judge ultimately agreed, APT’s case did not specify any trade secrets MarketDial may have stolen.
Parrish ruled that while APT presented plenty of information about the company’s operations, it did not convincingly prove that any of the information was proprietary.
“It is not enough to place on the doorsteps of the court volumes of expert reports, technical documents, and other materials (or incorporate such materials by reference through string cites in memoranda), insist that somewhere in all of it lies bits and pieces of information that could be assembled in such a way that resembles the statutory definition of a trade secret, and declare that there is a genuine dispute as to a material fact,” Parrish wrote in her ruling.
Osborne said there was no way MarketDial could have built its software with the information APT presented. The company asserts that it built its own software and did not take anything from APT, proprietary or not.
In its appeal, APT claims Stoddard and Davis knew they were stealing trade secrets and admitted it in messages to each other. It would “be a disaster” if APT learned of the information Stoddard was sharing was Davis, Stoddard wrote in an email, according to court documents.
Asked about the email and apparent admission, Osborne told The Tribune the exchange was mischaracterized and irrelevant unless APT can prove trade secret violations.
And, in focusing on whether specific “components” of the information APT presented were proprietary, rather than “each Compilation as a whole,” APT argues Parrish’s understanding of their claim was too narrow.
As it was suing MarketDial for stealing trade secrets, APT also alleged patent infringement violations. Its first patent infringement claim was dismissed, and a court invalidated APT’s patent, according to court documents. APT applied for and was granted a new patent, and tried to assert it in a new claim.
MarketDial argued that the new patent was essentially the same as the first, and asked Parrish — who had thrown out the first claim — to invalidate APT’s reissued patent, too. She did in June, according to court records.
“The fog of war”
Founded in 2016, Davis said most of his company’s life has been defined by this lawsuit. His company’s growth, too, has been stalled by it.
“Surely, we’re stronger in other ways because of it. Scrappier. We’ve got more hustle,” Davis said. “But it’s definitely damaged [the company].”
Not all startups would have survived six years of legal battles, Davis said. Under the weight of legal fees and time, Davis said he’s seen other companies fold.
Davis and Osborne both said they think that was APT’s goal all along — to drag them through the legal system until they broke. APT maintains its legal claims are legitimate.
“What we want to do is compete in the marketplace, not in a court of law,” Osborne said.
But, Davis said, MarketDial was lucky to have insurance that covered a good chunk of the legal fees, and clients and investors who stuck around or took a risk on a company enmeshed in litigation.
“It’s funny, you spend so much time in the fog of war that it’s hard to sort of, when the sun rises, start looking ahead,” he said.
While Davis recognizes MarketDial hasn’t completely escaped the shadow of the lawsuit, he said it feels like the clouds are parting, and he hopes the company can now capitalize on things the lawsuit made so difficult: Raising more money, growing its customer base, hiring more employees.
“What we set out to do is help retailers, in a challenging time for retail,” Davis said. “That’s the goal here, right? How can we get back to our day job of helping retailers grow, and thrive in the meantime?”
MarketDial is a Salt Lake Tribune sublessor at The Gateway in Salt Lake City
Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.
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