Judge Gives Averon OK to File AT&T Trade Secrets Suit Under Seal

U.S. District Judge Maryellen Noreika in Wilmington, Delaware, signed an order Thursday (docket 1:22-cv-01341) granting Averon’s motion for leave to file under seal its complaint alleging AT&T and mobile sign-in app ZenKey “misappropriated” its trade secrets.

Averon, a digital identity verification platform, said it requested confidentiality to protect “proprietary information” about itself and the defendants as contained in the complaint and its accompanying exhibits. AT&T previously blasted the complaint as an Averon publicity stunt and said it would defend aggressively against Averon’s “derogatory” allegations (see Ref:2210130012]). ZenKey hasn’t commented.

The lawsuit involves “a Fortune 15 corporation that misappropriated proprietary software technology from a start-up company under the guise of collaboration,” alleged the heavily redacted Oct. 11 public complaint. AT&T “then used its size advantage and monopoly power to drive the start-up out of business by poaching its existing and potential customers and locking it out of the marketplace,” it said. It alleged violations of the 2016 Defend Trade Secrets Act and of California unfair-competition laws.

Averon developed “a novel mobile authentication technology that solved problems with multiple factor authentication solutions,” said the complaint. Averon’s proprietary software technology leveraged established encryption technology available on mobile devices to validate a user’s phone number and SIM card, and in some instances a user’s location. Its technology used a mobile cellular network “to perform such validation before allowing the user access to third-party websites,” it said. “This eliminated the need for entering passwords or the need for sending separate authentication texts to the user’s mobile phone, otherwise known as two-factor authentication.”

Averon in 2017 discovered a “serious impediment to mass adoption” of its technology when it recognized that its passwordless authentication protocol “would work when an iPhone user was connected to the cellular network, but would not work when an iPhone user was connected to the Wi-Fi network,” said the complaint. Averon devised a method for overcoming the problem, and “determined the best course of action” was to protect as trade secrets the proprietary software technology that resolved the issue, it said.

Averon “sought out and collaborated” with AT&T to “advance” its proprietary technique, said the complaint. AT&T’s “role” in the collaboration was to supply customer verification signaling to Averon, while Averon’s was to design and implement “2nd factor authentication” that used cellular-based signaling, among other tasks, it said. Averon later asked top AT&T executives for “introductions to Verizon and T-Mobile to give Averon the opportunity to share its solution,” it said.

The complaint alleges AT&T “intentionally and willfully withheld disclosing” to Averon its formation of ZenKey and the subsidiary’s “purpose to offer passwordless authentication services.” Simultaneous with AT&T’s collaboration with Averon, AT&T formed ZenKey as a competitor “in a joint venture partnership with the other major wireless providers,” it said. “AT&T knew, or should have known, that offering the ZenKey application would directly impact the viability of Averon’s business model and would lead to the demise of Averon,” it said.

By “usurping” Averon’s trade secrets and forming a joint venture “with the next two largest wireless providers (the same providers that Averon expected to be its customers),” AT&T and ZenKey “foreclosed all opportunities for Averon to offer its technology,” said the complaint. “Defendants monopolized the critical technology and the underlying data needed for that technology, thereby destroying the value of Averon’s business.”

The complaint seeks restitution of lost revenue and profits, plus “compensatory, special, incidental and consequential damages.” It also seeks a permanent injunction barring AT&T and ZenKey and “any third parties” associated with them from accessing or using Averon’s trade secrets “for any commercial purpose.”