Court Denied Facebook Motion to Disclose Plaintiff’s Litigation Funder Info in Trade Secret Lawsuit

Neural Magic, an artificial intelligence start-up, filed a lawsuit against Facebook and Aleksandar Zlateski for the unauthorized use of their trade secrets. According to the claim, Aleksandar Zlateski was associated with Neural Magic and signed a non-disclosure agreement to keep the internal secrets of the start-up confidential. 

However, in July 2019, Zlateski left Neural Magic and joined the social media giant Facebook Inc. He breached the confidentiality agreement and shared the trade secrets with Facebook, which has used the start-up trade secrets in its own A.I. projects and has also published some of the technology on the popular developer service GitHub for the free use of the general public.

Neural Magic contacted Facebook and Zlateski against the misappropriation of their trade secrets and requested to remove its trade secrets from GitHub. 

Facebook did not take into consideration the claims of the start-up and refused to remove the trade secret from GitHub. 

In order to protect its trade secrets and to prevent the further disclosure of confidential information by Zlateski, the start-up filed a lawsuit against Facebook and Zlateski. The lawsuit demanded unspecified damages for the misappropriation of trade secrets, the loss to its business and market opportunities. The claimant also demanded an injunctive order of the court to prevent any further use of Neural Magic’s trade secrets and disclosure of further information to Facebook. During the pendency of the case, Facebook filed a motion with the Boston Federal Court to compel the discovery of information related to third-party funding over the lawsuit filed by Neural Magic. 

According to Neural Magic, Facebook Inc had filed a motion to seek information about the litigation funder’s identity and the nature of the funding agreement. They claimed that the information requested by Facebook is irrelevant, and they are not legally bound to provide the information. 

The courts of law in the United States have considered the information related to third-party litigation funding irrelevant to the substance of the case. But Facebook claims that the information requested by the company is essential to the case, and they requested the court to provide them access to the information. 

After considering the claims of both parties, the Boston Federal Court held that Facebook is not entitled to receive the information requested. The information about third-party litigation funding is not relevant to the substance of the case. U.S. Magistrate Judge Marianne Bowler denied the Facebook motion to compel discovery and held that the requested information is irrelevant or not proportional to the needs of the case.

Third-party litigation funding does not affect the lawsuit’s substance. They are a private arrangement between the parties; therefore, it is not mandatory to disclose the terms and conditions of the third-party funding agreements. The decision of the Boston Federal Court to dismiss the motion of Facebook is in compliance with the law, and it resonates with the practice of the majority of the courts in the U.S. and the Advisory Committee on Civil Rules, which has rejected the calls from policy groups to amend the Federal Rules of Civil Procedure to mandate disclosure. 

Third-Party litigation funding provides great assistance to litigants to pursue justice in the courts of law. The disclosure of the identity of the funder, including their name, address, place of formation, and other important details as requested by Facebook, may disproportionately affect the claim of Neural Magic.

In order to avail of litigation funding, litigants have to file a request with third-party financiers. They evaluate the merit of the claims and grant funding to the most meritorious claims. Thus, the very nature and practice of litigation funding are fully aligned with the civil justice system’s public policy and overall purpose. Funding ensures that the most deserving parties with strong and meritorious legal claims receive fair compensation for the loss that occurred to them. 

Litigation financing arrangements do not transfer the litigation rights from litigants to funders. Litigants and their counsels have the right and authority to make decisions such as settlement, etc. Litigation funding only provides financial assistance to the deserving litigants to proceed with their claims without stressing about finances.

The decision of the Boston Federal Court to deny access to Facebook to the information about third-party litigation funding reflects the stance of the majority of courts in the U.S. It has substantiated the argument that third-party legal funding is not relevant to the substance of the case and it does not influence the merits of the case. Litigation funding only provides assistance to meritorious litigants to pursue their cases in the courts of law to seek justice. With this said, it is a commendable decision of the court and it will upheld the administration of justice.