Tech

Spyware, trade-secret theft, and $30m in damages: How two online support partners spectacularly fell out

On Thursday, a jury in a federal court in Oakland, California, found call center biz [24]7.ai – as in, 24/7 – guilty of unfair competition and stealing trade secrets from chatbot maker LivePerson, awarding the company more than $30m in damages.

The case was filed in 2014. In its complaint [PDF], LivePerson described how its partnership with 24/7 went bad.

LivePerson provides online engagement technology, which takes the form of chatbots that corporate clients add to their websites to field questions, gather interaction data, and reduce customer support costs.

24/7 initially offered contract call center personnel to businesses, for times when a human touch is required. It subsequently branched out into engagement technology, becoming a competitor, and therein lies the lawsuit.

In 2006, when there was less product overlap, the companies entered into a contractual relationship, subject to confidentiality and non-competition clauses, to provide business customers with access to both automated and human support systems – because chatbots work better with a sentient failover.

In the years that followed, 24/7 learned about LivePerson’s live interaction technology and its methods for implementing such systems on websites.

Starting around 2012, the complaint says, 24/7 began abusing its insider access to copy LivePerson’s technology and proprietary data related to customers Capital One, Optus, and Sears.

24/7, it’s claimed, maliciously disrupted LivePerson technology on the websites of customers, misrepresented data related to LivePerson’s technology, services, and system performance to promote its own competing service, and “[injected] spyware into LivePerson’s databases, through unauthorized use of LivePerson’s copyrighted code, in order to gather information regarding the operation of LivePerson technology—presumably to reverse engineer LivePerson’s technology.”

After 24/7 developed a competing version of LivePerson’s live-interaction technology, the call center company is alleged to have installed its rival system on the websites of mutual clients to sabotage the LivePerson code.

“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,” the complaint states. “24/7’s spyware appears expressly designed to capture confidential and proprietary information and data regarding LivePerson’s technology and client relationships.”

The injected code is said to have derailed LivePerson chat bots by preventing live-chat sessions from launching or by removing the “chat” button that’s necessary to open a chat window.

LivePerson contends that 24/7 used its spyware to reverse engineer LivePerson’s technology, to copy it, and to interfere with its client relationships. The complaint says that clients told LivePerson personnel that 24/7 had been disparaging its partner and that LivePerson lost major customers as a result of the whisper campaign.

In its answer to the complaint [PDF], 24/7 denied the bulk of the allegations.

Nonetheless, after seven years of legal wrangling, the jury found the evidence – mostly filed under seal – credible and imposed $6.74m in compensatory damages and $29.59m in punitive damages [PDF].

24/7 did not respond to a request for comment.

In a statement to The Register, Sharre Lotfollahi, a partner at Kirkland & Ellis, celebrated the decision.

“This was a terrific win for our client LivePerson, who filed this case seven years ago to defend its intellectual property rights against a competitor,” she said. “It confirms that the significant investments LivePerson has made in its cutting edge online customer engagement technology is valuable and protectable intellectual property and that companies that do not respect others’ intellectual property rights will be held accountable.

“We had a very engaged jury who paid close attention throughout the month-long trial and we are pleased that they agreed with our client LivePerson that its technology had been stolen by 24/7,” said Lotfollahi. “The jury awarded significant punitive damages for 24/7’s conduct.” ®


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