Litigation Rocks the America's Cup.

OneWorld Challenge has filed a King's County Washington Superior Court lawsuit on August 15, 2001 naming as defendant a "John Doe." In its complaint OWC alleges that an unnamed former OWC employee or contractor had offered to sell to Oracle Racing unspecified America's Cup technology. The complaint alleges that when Oracle later learned the materials to be purchased were improperly obtained, they cancelled the purchase, advised OWC but would not disclose the employee's identity. The Superior Court has issued an injunction against "John Doe" which prohibits the transfer and dissemination of OWC's trade secrets - however neither the lawsuit or restraining orders have been served on the former employee although it appears they know exactly who amongst the 5 former employees that they are accusing. Although the court gave OWC approval to take Oracle's deposition testimony to identity the perpetrator they haven't done that either, apparently having received the information voluntarily from Oracle and being comfortable that the complaint's filing would suffice to send the message to team members not to steal or misuse team secrets.

The Seattle lawsuit seeks compensatory damages for the loss of what it claims is $2.5M invested in the technology Oracle was to or did purchase, as well as punitive damages. There may be other lawsuits that the syndicate has filed in other jurisdictions to implement the Washington court's restraining orders, including in California and New Zealand. Except for the injunctions issued by the court, there has been little activity, another indication that the lawsuit was intended as an intimidation device, a tactic McCaw has used for years in the game of business acquisition hardball.

A big question is posed by whether the filing of the OWC lawsuit violated the Protocol's prohibition of litigation by competitors. The rule provides that AC disputes must be resolved, depending on their nature, by the America's Cup Arbitration panel, a group empowered to decide a wide variety of matters such as Oracle's threatened acquisition and use of design technology described in OWC's lawsuit. Is it possible that OWC will now face disqualification now that its circumvention of the rules for competitive purposes has been discovered?

One last item of note, the OneWorld lawsuit is set for trial in Seattle on January 13, 2003 - smack dab in the middle of the Challenger Selection Series Finals. Presumably OWC realizes the reality that it will be home by Christmas . . .

October 22, 2001 8:20 PM