CryptoKitties has been growing fast with its cryptocurrency-enabled blockchain collectible kittens, and that enabled creator Axiom Zen to raise a hefty round of funding.
But another company has sued Axiom Zen (also known as Launch Labs) for trade secret theft and violating a non-disclosure agreement related to its recent deal with Golden State Warriors’ star basketball player Stephen Curry.
Jevon Feinblatt, CEO of San Diego, California-based Founder Starcoin (which goes by the brand name Tradestar), said in an email that his company sued for trade secret misappropriation and breach of a previously signed confidentiality agreement.
He said that Tradestar engaged in e-mail communications with Axiom Zen in February 2018 to discuss collaboration on development. Tradestar disclosed confidential details about a to Axiom Zen many confidential details, including a digital Stephen Curry collectible trading card. Although Axiom Zen reportedly signed a non-disclosure agreement, it recently announced that it had created its own Stephen Curry collectibles.
In a statement, a spokesperson for CryptoKitties maker Axiom Zen said, “We have been falsely accused of breaching an NDA and believe the lawsuit has no merit. Axiom Zen is a company that is committed to ethical and responsible work, including ownership and protection of data.”
In addition, after saying it had a deal to post collectible assets based on Curry, Axiom Zen took them down. In a post, it said, “We have reason to believe Stephen wasn’t as involved in the CurryKitties as we thought. Until we’re sure he’s an active participant, we’re suspending the campaign.”
The Curry deal was important because it was supposed to produce the first-ever celebrity-branded CryptoKitty.
CryptoKitties became a sensation after it debuted in November as a collectible game built on top of a blockchain and the Ethereum cryptocurrency. In March, the CryptoKitties maker, Axiom Zen game studio, spun out as a separate company and raised $12 million in funding from Andreessen Horowitz and Union Square Ventures.
As of March, CryptoKitties had gained more than 1.5 million users who had conducted more than $40 million in transactions. Some of the game’s most popular cats have sold for the equivalent of more than $200,000.
The idea behind Ethereum-based CryptoKitties is to make blockchain technology accessible and relevant to everyday consumers. Blockchain is the transparent and secure decentralized ledger system behind cryptocurrencies, such as Ethereum and Bitcoin. It can verify that a digital image or file is authentic and is the sole copy.
Axiom Zen had previously said it was able to access the Curry collectible assets through a deal with AppMoji, which creates and distributes branded digital assets.
According to exhibits in the lawsuit, the NDA between Axiom Zen and Tradestar was signed by Sam Gharegozlou in operations at Axiom Zen. Tradestar was eventually told that Axiom Zen could not work with Tradestar for some months.
But on May 7, Axiom Zen announced the Curry assets, and Tradestar decided to sue. The lawsuit, filed in U.S. District Court in San Diego, alleged that Axiom Zen never informed Tradestar it was working with Curry.
The lawsuit said, “In fact, since Axiom received Starcoin’s confidential information, two investors who had previously expressed interest in Starcoin — such as CAA Ventures and Digital Currency Group — have now passed on investing opportunities offered by Starcoin, and instead they have both funded Axiom.”
Starcoin said that it would have to change its entire strategy because its planned business model was stolen and it would now be perceived as a copycat if it goes forward. Portions of the lawsuit with confidential material are blacked out, under seal.
Updated: 7/11/18 11:38 pm — A judge dismissed the lawsuit.
