Of Possible Pinterest

An interesting decision yesterday from the New York Appellate Division for the First Judicial Department

In this action, plaintiff Theodore F. Schroeder and two companies founded by him, plaintiffs Rendezvoo LLC (Rendezvoo) and Skoop Media Associates, Inc. (Skoop Media), allege that defendants Brian S. Cohen, New York Angels, Inc. (NY Angels), and Pinterest Inc. (Pinterest) stole and illegally used Schroeder’s confidential ideas, technology and business plans in developing the popular website, Pinterest.com. According to plaintiffs, Schroeder conceived of a novel web application that would allow Internet users to share information about themselves by posting interests, ideas and pictures to their interface boards, a concept very different from then-existing popular social network sites like Facebook, MySpace and Friendster.

Schroeder and two friends embarked on the project and later invited Cohen, an investor and self-proclaimed “entrepreneurial mentor,” to join the group. Plaintiffs allege that after learning all about Schroeder’s ideas, technology and business plans, Cohen absconded with them, and gave them to Pinterest, which then used the information to develop its own highly- successful website. After subsequently learning that Cohen played a material role in the early stages of the Pinterest website, plaintiffs brought this action for, inter alia, breach of fiduciary duty, misappropriation and unjust enrichment.

The facts alleged in the complaint are as follows. In 2005, while attending Columbia Law School, Schroeder and a law school classmate, nonparty Brandon Stroy, developed an idea for a social network bulletin board where users could share their physical locations with their friends over the Internet. According to plaintiffs, no such website existed at the time. Lacking technological expertise, Schroeder taught himself computer programming, and spent more than 2,000 hours learning the necessary programming skills to develop the idea into a web application. Another law school classmate, nonparty William Bocra, came on board to further develop the idea and prepare a business model for the project.

Eventually, the three entrepreneurs formalized the project by forming Rendezvoo, a limited liability company in which Schroeder held a 65% interest, with Stroy and Bocra each holding a 17.5% interest. Schroeder was given a majority interest in the company because the idea was originally his, and because he was solely responsible for developing the web application and all technical processes. Schroeder was named president of Rendezvoo and was tasked with overseeing the day-to-day activities of the company, and performing all technical work in developing Rendezvoo’s website. Under Rendezvoo’s operating agreement, all members of the company owed each other fiduciary duties, and were expressly prohibited from unilaterally taking any corporate opportunities.

The court

 modified, on the law, to grant the Cohen defendants’ motion as to the promissory estoppel claim, to deny the Cohen defendants’ motion as to the misappropriation of trade secrets/ideas and breach of fiduciary duty claims, and otherwise affirmed, without costs. Appeals from the aforesaid orders, dismissed, without costs, as subsumed in the appeals from the judgment.

(Mike Frisch)