Facebook loses bid for litigation funder info in trade secrets lawsuit

People are silhouetted as they pose with laptops in front of a screen projected with a Facebook logo. REUTERS/Dado Ruvic
  • Dispute part of startup Neural Magic's trade secrets case against Facebook
  • Boston federal judge denied Facebook's motion to compel discovery of funding documents

(Reuters) - Facebook Inc won't get information from an artificial intelligence startup on third-party funding of a trade secrets lawsuit that the startup, Neural Magic Inc, is pursuing against the social media giant in Boston federal court.

U.S. Magistrate Judge Marianne Bowler denied Facebook's motion to compel discovery in an electronic order entered Wednesday, finding the requested information irrelevant or "not proportional to the needs of the case."

The discovery dispute arose from a March 2020 lawsuit that Neural Magic filed accusing Facebook and a former employee who decamped to the social media company, Aleksandar Zlateski, of misappropriating computer algorithms key to the startup's business.

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Facebook's request remains sealed. But according to the startup's filing in response, Facebook and Zlateski sought information on the litigation funder's identity and nature of the funding agreement, which Neural Magic said an "overwhelming majority of courts" have considered irrelevant.

They also asked for assessments by Neural Magic's lawyers of the startup's claims and documents showing the alleged trade secrets' valuations.

The startup said Facebook asserted the information is relevant to "damages and/or disclosure, to refute NMI's 'David and Goliath' theme, and to protect against juror bias."

Neural Magic said the information is not relevant to the claims or shielded by attorney work product protection.

A lawyer representing Facebook from Latham & Watkins didn't immediately respond to a request for comment on Wednesday. Nor did a Quinn Emanuel Urquhart & Sullivan lawyer representing Neural Magic or Zlateski's lawyers at Beck Reed Riden.

Bowler's order said some of the requested documents are irrelevant. Others, including those related to anticipated incurred damages and valuations of trade secrets, are "to a degree relevant," but aren't proportional to the matter.

The case is Neural Magic Inc v. Facebook Inc, U.S. District Court for the District of Massachusetts, No. 1:20-cv-10444.

For Neural Magic: Patrick Curran of Quinn Emanuel Urquhart & Sullivan

For Facebook: Christopher Henry of Latham & Watkins

For Aleksandar Zlateski: Russell Beck of Beck Reed Riden

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Sara Merken reports on privacy and data security, as well as the business of law, including legal innovation and key players in the legal services industry. Reach her at sara.merken@thomsonreuters.com