Here’s why St. Pete’s Penny Hoarder has gone to court against a bigger rival
For a website developer, source code is fundamental.
At The Penny Hoarder, a St. Petersburg-based personal finance website, the source code is the culmination of years of investment and development.
So when a rival firm, Fluent Inc., hired one of The Penny Hoarder’s web developers and allegedly asked him to copy the proprietary source code for the rival’s own use, The Penny Hoarder sued Fluent.
The lawsuit claims copyright infringement, unfair competition and breach of contract, and asks for an injunction to keep Fluent from using its trade secrets, including the source code.
The lawsuit, filed May 15 in federal court in Tampa, is the latest in a series of court battles between the two companies.
Taylor Media, the corporate name for The Penny Hoarder, filed suit in Pinellas County Circuit in January Court against a former employee who left to work for Fluent.
Fluent then sued Taylor Media in Pinellas County in February, saying Taylor Media was interfering with its employee relationships. Those lawsuits were consolidated into a single case in late April, a couple of weeks before the federal court suit was filed.
Fluent (Nasdaq: FLNT), a digital marketing services company based in New York, is publicly traded and had $250 million in revenue in 2018, making it much larger than The Penny Hoarder, a privately held company with $36.9 million in 2017 revenue, according to its listing on the Inc. 5000.
“Too many times we’ve heard about big corporations taking advantage of hard-working content creators who lack the resources to fight back. We believe we have a duty to stand up for them and ourselves rather than stand idly by and watch it happen again,” Kyle Taylor, founder and CEO of Taylor Media Corp., said in a statement about the federal suit.
Fluent, which does business as The Smart Wallet, did not respond to a request for comment from the St. Pete Catalyst.
‘Secret sauce’
The Penny Hoarder’s “secret sauce” is the process the company has developed to drive readers to the website and to click on sponsored links, according to the federal lawsuit. Copyrighted content contributes to the effectiveness of that process, it said.
The Smart Wallet’s website “was purposefully designed” to be resemble The Penny Hoarder’s website, according to the suit, which shows a side-by-side comparison of the two sites. It also lists more than a dozen examples of content that originally published on The Penny Hoarder’s website and appeared with similar wording on Smart Wallet’s website a few days or weeks later.
Fluent had a campaign to hire Penny Hoarder employees and that gave Smart Wallet access to copyrighted content and trade secret information, the lawsuit said. It listed five former employees who were approached and hired by Fluent while they were working at The Penny Hoarder, including Joshua Darby, who was a web developer, and Logan Riley, media buyer, social media.
Riley had an employment agreement with Taylor Media that said she would not compete with the firm for a year after she left the company, prompting Taylor Media to file its initial lawsuit in circuit court in January against her.
Darby, who also had a non-compete agreement, gave a deposition in the suit involving Riley May 8. His testimony was highlighted in the federal lawsuit.
“In that regard, on May 8, 2019, Joshua Darby, an individual who was employed by TPH, but was then hired away by Fluent (as detailed below), testified in the State Court Action (as defined below) that while employed by Fluent, he was instructed to copy TPH’s password- protected, double-authenticated backend source code (“Source Code”). Fluent and/or SOS’s IT Project Manager, Nick Russo, asked him to engage in this misappropriation for Defendants’ own use and economic benefit. This Source Code is largely unique to TPH, includes innovation initiatives, software design patterns and security keys, amongst other things, and is the culmination of years of TPH investment and development.
Mr. Darby testified that he believes that, in retrospect, he was hired by Fluent in order to provide the Source Code.”
The Penny Hoarder filed its federal suit against Fluent a week later.
In his deposition, Darby said he said no to the request to copy the source code.
Darby no longer works for Fluent, the lawsuit said.
A hearing date has not yet been set for the case.
‘No other choice’
The Penny Hoarder is not the only company involved in a legal battle over trade secrets.
Tesla (Nasdaq: TSLA) went to court in March against self-driving vehicle startup Zoox and Chinese EV automaker Xiaopeng, alleging former Tesla workers took proprietary information from Tesla to their new employers, according to TechCrunch.
General Electric filed suit in December against Uptake Technologies, a Chicago-based data analytics firm, saying Uptake poached executives and trade secrets, the Chicago Tribune reported.
It’s more unusual for a smaller company to take on a larger one.
In his statement, Taylor explained the company’s action.
“Since its inception in 2010, The Penny Hoarder has prided itself on creating original and informative content for our readers. We recently discovered that Fluent and their website, The Smart Wallet, appears to have systematically copied The Penny Hoarder’s content and design in an attempt to confuse consumers and profit from our intellectual property.
“In recent months Fluent has tried to bully and intimidate The Penny Hoarder by poaching employees, opening an office across the street, filing a frivolous lawsuit to stop us from protecting our confidential information and even encouraging one of their employees to breach our firewall and steal code.
“While we believe in working out business differences in the most amicable way possible, Fluent has left us no other choice but to file a lawsuit.
“Too many times we’ve heard about big corporations taking advantage of hard-working content creators who lack the resources to fight back. We believe we have a duty to stand up for them and ourselves rather than stand idly by and watch it happen again.
“We remain committed to producing the best personal finance content and will defend our intellectual property vigorously.”
UPDATE: Josh Darby contacted the St. Pete Catalyst to clarify that he did not provide The Penny Hoarder’s source code to Fluent, even though he was asked to do so.
