UAE Bank Stole Trade Secrets, Orchestrated Arrest of InfoSpan Executive, Boies Schiller Claims in New Suit

2011-07-22

http://amlawdaily.typepad.com/20110720infospan.pdf

We've become pretty jaded when it comes to trade secrets litigation, but we've never seen anything quite like the allegations that Boies, Schiller & Flexner made in a recently-filed suit for California technology outsourcing company InfoSpan Inc. InfoSpan accuses the largest bank in the United Arab Emirates, Emirates NBD Bank PJSC, of ripping off its technology, having one of its executives arrested under false pretenses in Dubai, and leaving him penniless and stripped of his U.S. passport after his release.

InfoSpan's 33-page complaint, filed last Friday in Los Angeles federal district court, asserts that Emirates NBD fraudulently seized control of technology InfoSpan developed for mobile banking and then "corrupted the UAE's legal processes" to intimidate the company. The suit seeks unspecified damages for trade secret misappropriation, breach of confidence, breach of contract, and related claims.

Here's the backstory according to InfoSpan's lawyers at Boies Schiller: Beginning in 2007, Emirates NBD had partnered with InfoSpan to use technology the company developed in 2003 to facilitate cross-border fund transfers. Revenues from the project were expected to earn InfoSpan $2.8 billion in fees by 2012. Based on the success of the partnership, the bank even considered buying a controlling interest in InfoSpan.

In May 2008, the complaint alleges, Emirates NBD suddenly suspended user testing of the InfoSpan system. A month later the bank announced that it would independently offer mobile commerce services similar to InfoSpan's. InfoSpan protested, but its fears were allayed when Emirates NBD promised to use InfoSpan's technology if it opened a Dubai data center. By May 2009, InfoSpan had installed the mobile banking system.

But that same month, InfoSpan claims, Emirates NBD informed InfoSpan that it was rescinding its agreement, purportedly because the company had overcharged the bank $1.46 million. The bank also claimed that an InfoSpan subsidiary incorporated in the Cayman Islands had misrepresented itself as existing in the UAE, and that the project was behind schedule and had not met agreed upon standards.

Emirates NBD next filed a criminal complaint with Dubai police alleging that deputy CEO Larry Scudder had defrauded the bank out of the $1.46 million. InfoSpan claims that Emirates NBD had ties with the police and aimed to intimidate the company with "sham" allegations.

In May 2009, according to the complaint, police arrested Scudder at the Dubai airport. They released Scudder the next day but held onto his passport, preventing him from leaving the UAE for the next six months. During that time, InfoSpan claims, Scudder had no income because its offices in the UAE had been closed. "Mr. Scudder survived through the kindness of people at the church he attended in Dubai," according to the complaint.

InfoSpan CEO Farooq Bajwa, who was in California, had tried to cut a deal with Emirates Bank officials to get Scudder's passport released. The complaint claims a bank official told him in substance to sign over the project. In a subsequent call, the same official allegedly told Bajwa that if he ever came back to Dubai, "you'll never leave alive."

The Dubai police finally allowed Scudder to swap his passport for one belonging to someone at his church, permitting him to leave the country. Emirates Bank has meanwhile misappropriated InfoSpan's data center and technology, the complaint claims, and has since marketed InfoSpan's product, including to banks first approached by InfoSpan.

We contacted Emirates NDB for comment via e-mail but didn't hear back, and we were unable to reach a bank spokesperson by phone. InfoSpan counsel William Isaacson of Boies Schiller was not available for comment.