Knicks, Raptors and Trade Secrets: More Like This to Come?

Sports-related trade secret misappropriation disputes are not frequent occurrences, or at least they do not frequently play out publicly. But this week, we have a data point that provokes reassessment of that thesis. 

On August 21, 2023, the New York Knicks sued the Toronto Raptors, the Raptors’ head coach, a former Knicks’ employee and other individuals in a U.S. district court for alleged “theft of proprietary information,” including trade secrets.  (Civil Action No. 1:23-cv-7394, S.D.N.Y.) The information at issue includes “scouting reports, play frequency reports, a prep book, and a link to third-party licensed software.”

So, are we about to see more sports-related trade secret misappropriation cases in public forums, namely, federal and state courts?   We might for two reasons.  First, over the past two decades or so, the use and importance of allegedly confidential data and analytics, which are potential trade secrets, have dramatically increased across all sports.  Second, the expansion of legalized sports betting is catalyzing heightened information security measures and enforcement efforts to better protect the integrity of the games.  Indeed, from an integrity standpoint, misappropriated trade secrets properly can be characterized as illegal performance enhancing information.

There are also two reasons why we might not see more sports-related trade secret misappropriation cases in public forums. First, gamesmanship, such as stealing signs or play calls, is an intriguing element of the games and has been part of North American professional sports for a long time. Misappropriating trade secrets generally may be seen as nothing more than a form of gamesmanship.  Second, North American leagues and franchises, except for the Green Bay Packers, are privately owned and operated enterprises that often rely on self-governance and arbitration to resolve disputes.  There may be a continuing desire to resolve as many disputes as possible behind closed doors to avoid or limit public and other fall-out. 

Ultimately, we now have a mix of (1) sports, (2) expanded, legalized sports betting, (3) huge, i.e., even more, dollars and (4) trade secrets.  Too much money is privately and publicly at stake now.  We will see more sports-related trade secret misappropriation cases in federal and perhaps state courts.  An avalanche of cases?  Probably not.  At the same time, there will be more predatory franchises and individuals looking for nuggets to transform players into stars.  Brave franchises will call out those who pirate their trade secrets.  The accused may try to dodge the suit.  The accused and league may be on a rocky road for a while.  But ultimately, the guardians of integrity will force the buccaneers to take the heat, bear the responsibility and pay the bills.