Trade Secrets in Professional Sports: The New York Knicks vs. The Toronto Raptors

It is no secret that professional sports franchises have several things they want to keep secret, such as playbooks, scouting strategies, film meetings, and data that help their team make difficult decisions in such a competitive industry.[1] A common issue for sports franchises is that every year they lose players to other teams for various reasons,[2] which allows for the possibility of litigation if players misappropriate trade secrets. Players and other employees of a franchise are generally loyal to whatever team they play for, at least in the short term to win, and their interests will often be to give their team an advantage by creating more profits for the business through wins.[3] Thus, the likelihood that a player or employee may communicate information that was successful in the last franchise they worked for—or share gameplan strategies from their prior team—is not unreasonable given that athletes strive to win.[4]

A trade secret is an extremely valuable piece of information that a company wants to keep private and has used the necessary protection to ensure its legally entitled privacy – and right for that information to not be misappropriated with the “thief's” economic advantage.[5]  The Uniform Trade Secrets Act defines a legally entitled trade secret as information that: “Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”[6]

Common parties to a trade secret lawsuit are businesses, which typically bring a claim against former employees of that business or other rival businesses in the market.[7] The New York Knicks and Toronto Raptors are engaged in trade secrets litigation,[8] which has serious potential implications for the future of sports and IP law as teams increasingly use analytics.[9] This lawsuit will likely impact how sports franchises deal with similar disputes moving forward.

Case Breakdown

The New York Knicks initiated this trade secrets litigation after a former employee joined the Toronto Raptors and gave them information that the Knicks deemed confidential.[10] Ikechukwu Azotam was actively recruited by the Raptors before he left his position as Director of Video/Analytics/Player Development Assistant for the Knicks.[11] The Knicks allege that the Raptors and their first-year coach—Darko Rajakovic—conspired during the recruitment process to get Azotam to share confidential information to help Rajakovic establish the team's success.[12] Azotam allegedly sent a few thousand files to the Raptors by emailing information from his Knicks account to his personal email account, and then to the Raptors.[13] The substance of the materials within the emails being classified as trade secrets is disputed in this case.[14]

The Knicks allege that Azotam sent the Raptors scouting reports, play frequency reports, a prep book for teams, and a link to a third-party licensed software that assisted the Knicks in multiple areas of scouting and game planning.[15] To satisfy the elements of a civil misappropriation of trade secrets claim, the Knicks alleged that the materials were of critical success to their business, derived independent economic value from not being generally known to or readily ascertainable by another person who can obtain economic value from the disclosure or use of the materials, gave a competitive tool against other NBA teams who did not have them, were of enormous potential value to other teams, such as coaching strategies and methodologies for evaluating talent, and could even help the Raptors to lure employees away from the Knicks.[16] Additionally, the Knicks alleged that they took countless steps and made reasonable efforts under the circumstances to maintain the information’s secrecy through extensive security measures.[17] Lastly, the Knicks alleged that the defendants, Azotam and Rajakovic, misappropriated these materials by acquiring them through improper means of theft, misrepresentation, and that Azotam breached his contractual duty to maintain the secrecy of the Knick’s confidential information.[18]

In response to the Knicks, the Raptors filed a motion to dismiss on two main grounds.[19] First, the Raptors denied that these materials satisfy the elements of trade secrets misappropriation because they are not uniquely beneficial to the Knicks and are available to all other NBA teams.[20] Following this legal reasoning, the Raptors also allege that this suit is “baseless” and a “public relations stunt.”[21] More importantly, the Raptors argue that NBA Commissioner Adam Silver has sole jurisdiction over this case under the NBA constitution, which states that the Commissioner has “exclusive, full, complete, and final jurisdiction involving two (2) or more Members of the Association.”[22] The Knicks counter that Silver not only lacks authority under league rules, but also that his involvement would present an ethical issue.[23] The Knicks argue that Silver cannot and should not arbitrate this dispute for two reasons. First, the NBA Commissioner cannot issue a penalty of more than 10 million dollars, which the Knicks seek more than here.[24] Second, the Knicks claim that Silver has a conflict of interest because he is extremely close to Raptors part-owner Larry Tanenbaum.[25] Given these circumstances and that the Knicks allege both civil and criminal violations outside of just this trade secrets violation, the Knicks advocate for a different arbiter.[26]

Future Implications

The future implications of this case will depend on how the court rules. If the court finds Azotam liable for theft of trade secrets, then other teams could be incentivized to classify certain types of information as trade secrets to prevent other franchises from getting their hands on the information. For example, a team that has individual scouts and film tailored specifically for game planning against stars like Stephen Curry and Nikola Jokic—two of the leagues most dominant players[27]—could classify the reports and film as trade secrets. The independent economic value required to establish trade secret protection would come from an increased likelihood of other teams beating these players in a championship series, which increases profits drastically.[28] Furthermore, efforts such as password-protected accounts only given to certain employees within the organization could be proof of the information not being readily ascertainable to others, as well as reasonable under the circumstances to maintain secrecy.[29] If the court rules in favor of the Knicks, sports franchises would likely spend more time training and instructing their employees on what information is protected. Upon these employees exiting the company, the employers would likely remind the employee about any non-disclosure agreements and confidentiality documents they may have signed, and which information the franchise considers trade secrets, so that both sides can finish the exiting process while lessening the chance of future litigation.

If the court finds that there was no trade secrets violation, then there could be fewer future implications. If a court finds that no one is liable for this novel issue, then there is less of an incentive for teams to go about protective processes discussed in the above paragraph. However, this does not mean that this case has no implications at all. Franchises still have an incentive to avoid litigation and litigation threats,[30] so teams are still incentivized to take similar measures. Litigation is expensive,[31] can lead to negative publicity,[32] and takes a long time to resolve.[33] Additionally, franchises may be more likely to agree to costly settlements[34] due to the novelty of this issue and uncertainty about what would unfold in court. The sports and legal professions are naturally extremely competitive.[35] Teams could be incentivized to gain a competitive edge by trying to break through and finally win a lawsuit like this. Creative and aggressive litigators can be the first to set new precedents, after all.

In the alternative, other factors could tilt the scale toward a potential court ruling against the Knicks of having less of an impact. Generally, big corporate entities are busy with many moving parts,[36] and could be less likely to exhaust time and effort for something that has not resulted in an actual verdict in a case or became statutory law. Additionally, a ruling in favor of the Raptors means there would be no case precedent to support the position of threatening another side with litigation with the intent to settle a trade secrets misappropriation claim. There will likely be some movement in the industry regardless of the outcome, but a verdict without liability would probably result in less of an impact to trade secrets within franchises.  

[1] The Importance of Data Privacy in Sports Management, Sportz (Oct. 6, 2022, 6:19 PM), https://isportz.co/sports/the-importance-of-data-privacy-in-sports-management/.

[2] Aram Koukia, Why Your Team’s Star Players Quit?, Medium (Dec. 29, 2017), https://koukia.ca/why-your-teams-star-players-quit-923de334ba03.

[3] Jarryd Dent, How Winning A Championship Elevates Franchise Value, LinkedIn (June 13, 2023), https://www.linkedin.com/pulse/how-winning-championship-elevates-franchise-value-jarryd-dent-mba.

[4] Why do we like Winning?, InnerDrive, https://blog.innerdrive.co.uk/sports/why-we-like-winning#:~:text=The%20reason%20why%20winning%20feels,to%20experience%20again%20and%20again.

[5] The Investopedia Team, Trade Secret: Definition, Examples, Laws, Vs. Patent (Dec. 22, 2022), https://www.investopedia.com/terms/t/trade-secret.asp.

[6] Trade Secret, Legal Info. Inst. https://www.law.cornell.edu/wex/trade_secret#:~:text=Derives%20independent%20economic%20value%2C%20actual,circumstances%20to%20maintain%20its%20secrecy (last visited Mar. 27, 2024).

[7] Building a Successful Trade Secrets Misappropriation Case, Lubin Austermuehle, https://www.chicagobusinesslawfirm.com/building-a-successful-trade-secrets-misappropriation-case.html#:~:text=Typical%20evidence%20an%20employer%20will,former%20employee%20took%20the%20information (last visited Mar. 27, 2024).

[8] Baxter Holmes, ‘This Isn’t the 11 Herbs and Spices’: Inside This Unprecedented Knicks-Raptors Lawsuit, ESPN (Nov. 30, 2023, 8:00 AM), https://www.espn.com/nba/story/_/id/39007136/this-11-herbs-spices-unprecedented-knicks-raptors-lawsuit.

[9] John P. Burns, The Increased Use of Analytics in Sports Could Lead to a Rise in Employment and Trade Secret Lawsuits, Mandelbaum Barret PC (Nov. 10, 2023), https://www.mblawfirm.com/insights/labor-and-employment-insights/the-increased-use-of-analytics-in-sports-could-lead-to-a-rise-in-employment-and-trade-secret-lawsuits/

[10] Holmes, supra note 8.

[11] N.Y. Knicks v. Maple Leaf Sports & Ent., No. 1:23-cv-7394, at *2 (S.D.N.Y. Aug. 21, 2023).

[12] Id.

[13] Id.

[14] Jack Maloney, Raptors File Motion to Dismiss Knicks’ Lawsuit, Which They Call ’Baseless’ and a ’Public Relations Stunt’, CBS (Oct. 16, 2023, 1:55 PM), https://www.cbssports.com/nba/news/raptors-file-motion-to-dismiss-knicks-lawsuit-which-they-call-baseless-and-a-public-relations-stunt/#:~:text=The%20Toronto%20Raptors%20have%20filed,relations%20stunt%22%20by%20the%20Knicks.

[15] N.Y. Knicks, supra note 11, at 8.

[16] Id. at 13.

[17] Id.

[18] Id.

[19] N.Y. Knicks, supra note 11, at *1; see also Baxter Holmes, Knicks Seek $10M+ in Damages From Raptors, Say Silver Shouldn’t Arbitrate, ESPN (Nov. 20, 2023, 1:54 PM), https://www.espn.com/nba/story/_/id/38946152/knicks-seek-10-million-damages-raptors-say-adam-silver-arbitrate-dispute.

[20] N.Y. Knicks, supra note 11, at *2.

[21] Id. at 1.

[22] Const. and By-Laws of the Nat’l Basketball Ass’n, N.B.A., at 36 (May 29, 2012).

[23] Wenzell Ortiz, Knicks Request Adam Silver Not Arbitrate Raptors Case, Argue Conflict of Interest, Yahoo! Sports (Nov. 20, 2023), https://sports.yahoo.com/knicks-request-adam-silver-not-arbitrate-raptors-case-argue-conflict-of-interest-231737696.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAIJFehQlvDmjhey5-w9_gG--B27u2vebYu3F6gK9LfQKoyAp7Ban2oGK9GaG7yETWwzcf07qL0Njh7r6uTvDRSfb4c-weJ_cEr18z5Vtg5kXXdM7Vu2lgYSrpIO1KyVBX1Xbrt0Syz3rlykYtQtf8TlzXP02jkDSKeCfYiNa1Zqa

[24] Holmes, supra note 8.

[25] Id.

[26] Id.

[27] Brad Botkin, James Herbert & Jack Maloney, NBA Top 100 Player Rankings: Nikola Jokic, Stephen Curry, Giannis eye No. 1; LeBron James falls out of top 10, CBS Sports (Oct. 12, 2023, 1:39 PM), https://www.cbssports.com/nba/news/nba-top-100-player-rankings-nikola-jokic-stephen-curry-giannis-eye-no-1-lebron-james-falls-out-of-top-10/.

[28] Dent, supra note 3.

[29] Stephen Qu, Login and Password Information Can Be a Trade Secret, RSA Conf. (Oct. 22, 2010), https://www.rsaconference.com/library/blog/login-and-password-information-can-be-a-trade-secret#:~:text=Maintaining%20trade%20secrets%20in%20computer,secret%20status%20of%20other%20information.

[30] Common Sense Tips For Avoiding Litigation, FindLaw (Apr. 26, 2016), https://corporate.findlaw.com/litigation-disputes/common-sense-tips-for-avoiding-litigation.html.

[31] Eugene Lee, How Much Do Lawsuits Cost?, Cal. Lab. and Emp. L., https://www.calaborlaw.com/how-much-do-lawsuits-cost/ (last visited Mar. 27, 2024).

[32] Dilip N, Impact of Lawsuits and Litigation on Brand Image, Supply Wisdom, https://www.supplywisdom.com/resources/impact-of-lawsuits-and-litigation-on-brand-image (last visited Mar. 27, 2024).

[33] How Long Does Litigation Take, The Legacy Laws., P.C. (Sept. 3, 2023), https://www.thelegacylawyers.com/blog/how-long-does-litigation-take/#:~:text=The%20time%20it%20takes%20to,last%20at%20least%20a%20year.

[34] The Most Expensive Lawsuit Settlements in History, Waldrons Solics., https://www.waldrons.co.uk/insights/the-most-expensive-lawsuit-settlements-in-history/ (last visited Mar. 27, 2024).

[35] Craig E. Wills, The Competitiveness of Games in Professional Sports Leagues, 3 J. Sports Analytics 103, 103-17 (2017) (discussing the competitiveness of sports); see also, How Large Law Firms Can Stay Competitive, Huntersure (Mar. 9, 2023), https://www.huntersure.com/how-large-law-firms-can-stay-competitive/.

[36] Why Starting a Business Is So Difficult The Challenges of Entrepreneurship, FasterCapital (Mar. 23, 2024), https://fastercapital.com/content/Why-starting-a-business-is-so-difficult--The-challenges-of-entrepreneurship.html#:~:text=It%20can%20also%20be%20one,with%20financial%20and%20legal%20issues.