RedTube, WEG Settle Suit Over Leaked Trade Secrets

Feb 8, 2010 1:45 PM PST
LOS ANGELES — RedTube’s lawsuit against WEG has been settled, XBIZ has learned.

U.S. District Judge Jacqueline Nguyen signed off this morning on an order discharging claims and vacating further motions in the case that pitted two large adult brands over allegations of leaked confidential documents, poached business secrets and cybersquatting.

WEG’s counsel, Allan Gelbard, told XBIZ that he couldn’t comment on the case because terms of the settlement’s agreement, which was signed by both parties Friday, are confidential.

“All of the parties were pleased with the outcome,” Gelbard said.

Operators of RedTube.com in November filed a lawsuit against WEG, formally known as Web Entertainment Group Inc., claiming the company scooped up a number of RedTube domain names with the intention to divert and acquire its traffic and profits.

RedTube said that Boca Raton, Fla.-based WEG purchased RedTube.org, RedTube.pl, RedTube.fr, RedTube.com.br, RedTube.br and RedTube.ca between 2007 and this year in an attempt to ride on RedTube.com’s coattails of “success, fame and goodwill” by using “confusingly similar names and domains.”

But the suit filed at U.S. District Court in Los Angeles went beyond cybersquatting. RedTube.com also claimed that a former company officer leaked a confidential memo that provided RedTube.com trade secrets when WEG apparently contemplated purchasing the tube site.

The leaked memo, RedTube.com operators claim, included business secrets, including marketing plans, revenue, profit margin and other financial data. The suit claimed that John Skorik, the former WEG company executive, provided the memo to Paolo Cammarata and Kevin Cammarata, the owner of Teen Revenue who filed a suit earlier this year at Los Angeles Superior Court.

Kevin Cammarata claims in that suit that RedTube unlawfully offers free movies as loss leaders in an attempt to crush the competition. Kevin Cammarata is seeking to have RedTube.com shut down by the court.

The Cammaratas' attorney, Jay Spillane, told XBIZ last week that TeenRevenue’s $40 million suit against RedTube is still moving along, “but at a snails pace.”

“The suit is now caught up in the appeals process, and it may take up to a year to get resolved,” Spillane said.

In RedTube’s suit against WEG that was dismissed today, the company said that WEG executed a confidentiality agreement to suitors when it contemplated selling the company in early 2008.

“The confidential memorandum was watermarked so that any copy of the memorandum bore the words 'Web Entertainment Group Inc.' in large type running diagonally from the bottom left-hand corner to the top right-hand corner of each page,” the suit said.

The suit claimed that WEG had no intention on buying RedTube.com and that the watermarked confidential memo ended up attached to a declaration that was introduced by Paolo Cammarata in the Los Angeles Superior Court action.

RedTube.com said in the suit that if it were not for the introduction of that memo, the Cammarata lawsuit “never would have been filed.”

RedTube.com, whose parent company is Hong Kong-based Bright Imperial Ltd., said in the WEG suit that it already has spent "hundreds of thousands of dollars in attorneys fees and costs" in defending the Cammarata litigation it refers to as the “Cammarata Costs.”

RedTube.com operators were asking the court to award unspecified damages and an injunction using the “RedTube” trade name on its sites.

It asked the court to find the Cammarata litigation costs were a direct result of WEG’s misappropriation of RedTube.com trade secrets and awarding those costs as damages.

XBIZ staff writer Lyla Katz contributed to this report.

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