The New York Knicks on Monday launched what could become a groundbreaking case in the intersection between analytics and trade secrets when they sued Atlantic Division rival Toronto Raptors, newly hired Raptors head coach Darko Rajakovic, Raptors video coordinator Noah Lewis and a so-called “mole”—former Knicks video and analytics staffer Ikechukwu Azotam—for misappropriation of trade secrets and other claims.
As the Knicks tell it, Azotam last month informed his bosses at the Knicks that he had received an offer from the Raptors and that he intended to accept it. Azotam then allegedly began to forward scouting reports, a link to third-party licensed software, play frequency reports and other proprietary materials from his Knicks email account to his Gmail account. Using Gmail he then forwarded on the confidential materials to his Raptors contacts. The Knicks say Azotam’s last day with the team was Monday, Aug. 14, and that he is now a “current employee” of the Raptors. However, Azotam’s name does not appear on the Raptors’ website.
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The Knicks stress these materials count as trade secrets under the law. A trade secret is information that meets three requirements: 1. Provides the Knicks with a competitive business advantage over other teams, 2. Must not have been known or shared with the public and 3. The Knicks must have taken steps to ensure the information was kept secret. The Knicks insist they met these requirements and that Azotam went so far as to transfer, via the Knicks subscription to Synergy Sports, over 3,000 files consisting of film and data. Azotam, the Knicks charge, also violated confidentiality provisions in his employment contract.
The Knicks emphasize that Azotam wasn’t acting alone. Raptors employees allegedly accessed the stolen files over 2,000 times and—reminiscent of the Cold War era with the CIA and KGB occasionally enlisting each others’ agents—allegedly “recruited and used Azotam to serve as a mole within the Knicks organization to convey information that would assist the Raptors defendants in trying to manage their team.”
The Knicks’ complaint, filed in the Southern District of New York, is an extremely unusual move by a pro sports team.
Like other major leagues, the NBA’s constitution, which governs the legal relationship between teams and leagues, instructs that NBA commissioner Adam Silver has “exclusive, full, complete and final jurisdiction of any dispute involving two or more” teams or officials. Silver also has the right to launch investigations on any matters “that may adversely affect” the league or its teams and to impose punishments.
The NBA (like other leagues) prefers for teams to resolve their disputes through internal arbitration methods, overseen by Silver and out of public view.
A federal lawsuit could lead to pretrial discovery where testimony and evidence (emails, texts etc.) generate public disclosures of sensitive financial information and/or potentially embarrassing statements. From a franchise law perspective, a lawsuit pitting teams against each other arguably undermines the concept of an association of member teams. These teams compete but they are also expected to value esprit de corps and to work together to maximize the league’s overarching business interests. This is why leagues are viewed under the law as joint ventures, rather than a group of unrelated business competitors.
But the Knicks depiction of the alleged trade secrets scandal suggests it was egregious enough to warrant federal court intervention.
To that point, Azotam had far-reaching access, as he was “responsible for planning, organizing and distributing all video scouting responsibilities for the Knicks coaching staff.”
The Knicks say Rajakovic is a “novice” since he has never previously been an NBA head coach, and that he and other Raptors officials “conspired to use Azotam’s position as a current Knicks insider to funnel proprietary information to the Raptors to help them organize, plan, and structure the new coaching and video operations staff.”
The alleged funneling included Azotam sometimes sending emails from his Knicks email address to his new Raptors email address. The emails were supposedly in response to Raptors’ requests, with one email titled “FW: INDIANA GAME 82” and that included an advanced scouting report on Indiana Pacers players and “comprehensive diagrams of over 250 Pacers’ plays.” He allegedly sent a similar email involving intel on the Denver Nuggets.
In addition to misappropriation, the Knicks allege violations of the Computer Fraud and Abuse Act and the Defend Trade Secrets Act as well as breach of contract, tortious interference, unfair competition, unjust enrichment and conversion. The Knicks demand a permanent injunction to bar the defendants from continuing to steal information and from using what they’ve already stolen. The team also seeks unspecified amounts of compensatory and other damages that would be determined at trial.
James Salzman, a professor at UCLA School of Law and Harvard Law School and co-author of Mine!: How the Hidden Rules of Ownership Control our Lives, told Sportico in an interview that damages could become a key issue.
“Assuming the Knicks’ allegations of sharing information are proven in court, the interesting part of this dispute will be determining the harm and damages,” Salzman explained. “This isn’t like a former employee funneling Coke’s secret recipe to Pepsi. Unless the information was shared with other teams, what is the harm and how should this be translated into monetary damages? Is the harm the special advantage this gave the Raptors when playing the Knicks, who beat them three times in four meetings? Would winning those games given the Knicks better seeding in the playoffs? Welcome to the world of counterfactuals—but for the stolen information we would have won those games and then…”
The Raptors and parent company Maple Leaf Sports & Entertainment released a statement to ESPN saying they only heard about this complaint last Thursday. The team says it “responded promptly” and pledged to launch an internal investigation. The statement went on to say the team was not “advised” a lawsuit was forthcoming and that the organization “strongly denies any involvement in the matters alleged.”
The NBA did not immediately respond to a request for a statement. The Raptors’ statement, coupled with the recency of the alleged facts, suggests the Knicks may have not fully pursued a grievance through the league before they decided to sue.
In an answer to the complaint, the Raptors could argue the Knicks failed to exhaust the league’s dispute resolution system before suing. The team might also question why the Knicks didn’t turn off Azotam’s work email account if they suspected he was dispatching property information.
If the Knicks claims are verified, the Raptors and their executives could face the possibility of substantial league punishments, including forfeiture of draft picks. In 2017, Major League Baseball docked the St. Louis Cardinals two top draft picks and fined them $2 million over a scandal that involved hacking the Astros’ email system and scouting database. That scandal led to criminal charges and a plea deal where former Cardinals executive Chris Correa pleaded guilty to unauthorized access of a protected computer.
One thing is certain: the Knicks are airing dirty laundry in an unprecedented, public way and it will make their games with the Raptors this fall a lot more interesting.