A trade secret dispute between the co-founders of Rival Games, an international online gaming platform, highlights the critical role that trade secrets and trademarks play in the success of these platforms. As alluded in the complaint, the survival of gaming platforms like Rival Games can turn on not just the value of their trade secret technology, but also their brand recognition and consumer loyalty in an increasingly competitive—and crowded—industry.
On October 2, 2023, Rival Games LLC co-founder Edo Cohen sued his former business partner, Shawn Murnan, for the alleged misappropriation of funds, business opportunities, and trade secrets. The lawsuit, filed in Delaware federal court, alleges that Murnan secretly funneled investments and profits intended for Rival Games into several other entities that he created and exclusively controlled. Moreover, Murnan allegedly redirected revenue derived from Rival Games to those very same entities he created.1
What Is the Case About?
Rival Games hosts virtual cash-prize tournaments for a diverse spectrum of games, including Call of Duty and NBA 2K, across different videogame systems. According to its website, GoRival.com, Rival Games has users in 16 countries and partnerships with several sports franchises, including the Dallas Cowboys, the Detroit Pistons, and the Chicago Blackhawks.
Cohen alleges the company began when Murnan approached him about a potential partnership to develop and market an online video game tournament platform. The two co-founders agreed then that Cohen would own 40 percent of the company and Murnan would own 60 percent, with both having equal decision-making authority. As with many new companies, Rival Games had negative cash flow in its first year, with Cohen working “around the clock” to develop the platform and Murnan managing the business side.
During this time, the complaint alleges, Murnan failed to adequately inform Cohen of any investments in Rival Games and instead diverted those funds into several different entities with “Rival” in their name (including “Rival Holdings” and “Rival Operations”). For instance, Cohen alleges that unbeknownst to him, Murnan misappropriated a $2.5 million grant made by a Robert Russell for Murnan’s personal use. Cohen further claims Murnan has refused to pay not only the $250,000/year salary that Cohen is owed, but also reimbursements for any funds that Cohen contributed to the company.
According to the complaint, Murnan has ceased all communications with Cohen. Murnan’s website GoRival.com, however, continues to operate, using what Cohen alleges to be Rival Games’s original platform. This use, the complaint states, is misappropriation of Rival Games’s intellectual property.
The complaint asserts claims for breach of contract, breach of fiduciary duty, and conversion under Delaware state law, and trade secret misappropriation under the federal Defend Trade Secrets Act.
Why Is This Case Important?
This action highlights the critical role that trade secrets and trademarks play for gaming platforms seeking to build and maintain a competitive advantage in a crowded industry. Cohen alleges that Murnan has extinguished essentially all of the trade secrets underlying his company’s platform and business model, thereby robbing him and Rival Games LLC of the significant value underlying the company’s intellectual property.
As the Rival Games platform rises in popularity and the case proceeds, the case will serve as a potent reminder of the value inherent in a gaming platform’s trade secrets and trademarks, as well as a cautionary tale for budding business partnerships.
For more information on this lawsuit or any related matter, please contact Lisa Zang, or any member of Wilson Sonsini's trade secret litigation practice. For more information about gaming companies generally, please contact any attorney in the firm’s electronic gaming practice and learn more about the practice by reading The Scramble.
Ariel Friedman, Benjamin Hewitt, and Lisa Zang contributed to this Wilson Sonsini Alert.
[1] Edo Cohen v. Shawn Murnan, Case No. 1:23-cv-01090-UNA (D. Del. Oct. 2, 2023).
