A Canada-based audio advertising technology company called VoxTonePro has sued Spotify for the alleged theft of trade secrets used to build its self-serve Ad Studio.
According to the complaint, filed in a Delaware federal court last week, Spotify’s ad studio “is essentially identical to the VoxTonePro ad creation system”.
Launched in 2017 in the US in beta, followed by the UK and Canada in March 2018, Spotify’s Ad Studio allows artists and businesses to make audio ads “from scratch” and run them on the platform.
The tool came out of beta last month and expanded into 18 new markets.
As reported by Law360, VoxTonePro, founded in the early 2000s by Nadeem Mughal, claims to have begun “developing a first-of-its-kind technology: a scalable, cost-efficient, self-service online application that utilizes proprietary technology and know-how to generate audio ads with voiceover narrations, music and/or sound effects”.
The filing suggests that by January 2015, “on information and belief, VoxTonePRO was the only company offering” such a service.
VoxTonePro, looking for potential partners, offered to form a partnership with Spotify in January 2015, which would see Spotify, as a reseller of VoxTonePro’s tech, offer its users the ad creation service through its website.
The complaint adds that VoxTonePro’s founder Mughal explained the company’s “unique position in the field of self-service audio ads” and that a Spotify exec “expressed interest in the platform and in finding out the ‘best way’ to ‘programmatically create ads’.
“Mr. Mughal provided a demonstration of VoxTonePro’s public-facing website to show how customers place orders,” continues the filing.
“Mr. Mughal also showed how resellers – like Spotify – could access VoxTonePro’s reseller portal. The discussion did not bear fruit.”
The allegations then get a lot more serious. According to the filing, “Spotify began plotting to steal VoxTonePro’s trade secrets in 2016, when Spotify reached out to VoxTonePro on its own initiative.
“In August 2016— 17 months after VoxTonePro shared with Spotify the idea of a “self-serve” ad platform—Spotify hired Derek Kuhl to develop a “self-serve” ad platform for Spotify.
“By this time, Spotify was a global enterprise and needed a self-service ad platform that could operate on a global scale—just like VoxTonePro.”
Adds the filing: “Mr. Kuhl quickly learned about VoxTonePro and Mr. Mughal’s 2015 demonstrations to Spotify. Mr. Kuhl wanted to bypass the hard work of creating a scalable, selfservice ad platform—by stealing what VoxTonePRo had already done.
“Over the next several months, Spotify dangled partnership prospects in front of VoxTonePRo in emails, phone calls, and at least one in-person meeting. Lulled into a false sense of trust and confidentiality, VoxTonePro revealed its trade secrets to Spotify.”
“This is a case about a big business stealing from a small business.”
In May 2017, “after having learned the details of VoxTonePro’s confidential business processes and technical methods” Mughal was “abruptly” told by Spotify that there would be no partnership after all.
Spotify, alleges the complaint, subsequently continued to use login details it had been provided “to access VoxTonePro’s restricted website, and used the confidential information previously provided by Mr. Mughal to develop and implement its own competing audio ad creation service”.
VoxTonePro’s filing suggests that “this is a case about a big business stealing from a small business” and that “before it had meetings with VoxTonePro, Spotify had no system for self-service voiceover ad creation”.
“After several meetings with VoxTonePro – during which it learned details of VoxTonePro’s platform and led VoxTonePro to believe that a partnership was coming – Spotify scrambled to launch a platform just like VoxTonePro’s,” it adds.”
“Having gotten what it wanted from VoxTonePro, Spotify brushed VoxTonePRO aside.”
VoxTonePro is demanding a jury trial, amongst other things, its prayer for relief ranges from “damages for actual loss caused by the misappropriation of its trade secrets” to “a reasonable royalty for Spotify’s misappropriation of VoxTonePro’s trade secrets”.Music Business Worldwide