This week in Los Angeles Superior Court AVN Publications and its owner Paul Fishbein filed a lawsuit against its industry competitor XBiz, XBiz’s owner Alec Helmy and Sara Sazzman, AVN’s former director of advertising.

The suit contends that Sazzman who had worked for AVN since 2002 before going over to XBiz at the end of March this year, misappropriated the company’s trade secrets with the full knowledge and cooperation of Helmy and XBiz.

AVN’s complaint details, among other things, breach of written contract, breach of duty of loyalty, violation of computer fraud and abuse act; violation of California Penal Code 502; misappropriation of trade secrets and unfair competition.

Also named in the suit are Adnet Media aka XBiz and Webstar Marketing Group Inc., a corporation owned by Helmy. The suit identifies Helmy as the president, chief executive officer and owner of the organizations identified in the complaint.

According to the allegations, Helmy and XBiz deliberately misappropriated trade secrets belonging to AVN.

“Because they could not fairly and ethically compete with AVN in the marketplace,” says the suit.

Lured by Helmy’s promise of more money and greener pastures, former AVN advertising account executive Sazzman conspired with XBiz to misappropriate AVN’s protected trade secrets out of sheer greed, the suit goes on to state.

“Upon learning of Sazzman’s betrayal and XBiz’s cavalier taking of AVN’s lawful intellectual property, AVN promptly advised both of them in writing repeatedly of their wrongdoing and the consequences of their continued illegal use of AVN’s protected information.”

The suit also contends that both Sazzman and XBiz elected to ignore AVN’s warnings, not to mention its legal rights. The suit states that AVN was left with no other choice but to avail itself of the protection of the law.

AVN makes its case by stating that it’s widely recognized as the preeminent source of news, information and advertisement in the adult entertainment industry in both print and electronic media.

“It has continually published its trade magazine since 1982.”

AVN also contends that in its existence, it has through great investment of time, money and effort, developed and maintained considerable confidential proprietary and trade secret information. It stores this information on its computer system and in other protected locations. This trade secret information is compiled in various ways including on a database known as “SalesLogix”.

According to the suit, this information includes detailed information, addresses and subscriber lists of 12,000 customers and potential customers. The database also includes information, identification, e-mail addresses and other contact information regarding vendors, paid subscribers and advertising prospects.

According to AVN, the database also includes advertiser sales histories, account status, customer finances, vendor economic arrangements, budgets, analyses regarding sales volume potential, inventories, accounts payable and receivable, sales projections billing information and account representative commissions.

The database also includes information pertinent to the publication of AVN itself including sources of content and editorial procedures.

The lawsuit calls XBiz a relative newcomer to the adult entertainment news and information space both in electronic and print media.
“XBiz was launched and continues to be operated on a copycat business model [to AVN],” states the lawsuit. In competing with others in the adult entertainment news and information marketplace, AVN relies heavily on trade secrets including the information contained in the SalesLogix database.

According to the suit, the AVN trade secrets, proprietary to AVN are not generally known to the public or to AVN’s competitors such as XBiz. AVN also claims that it has invested untold financial resources and manpower hours over a period of more than 25 years in developing those trade secrets.

“AVN takes significant steps to maintain the secrecy and confidentiality of AVN trade secrets,” continues the suit. They do this by requiring AVN employees with access to this information to sign a SalesLogix confidentiality agreement as well as other internal policy statements. AVN trade secrets are also restricted to authorized employees via secure passwords.

The suit goes on to state that Sazzman was hired by AVN July 8, 2002 as a sales rep. Over the course of her employment, Sazzman was ultimately promoted to the position of senior account director. Throughout her employment at AVN, Sazzman’s primary job duties included soliciting advertisers for AVN’s print and online publications; and creating advertising packages and proposals tailored to the needs and goals of prospective and current advertisers and negotiating deals.

As a condition of her employment, Sazzman, according to the suit, entered into a written employee agreement regarding trade and internal secrets.

Sazzman also agreed to hold all such AVN trade secrets in strict confidence and not reveal them to any party. Sazzman’s conditions of employment were also set forth in conditions outlined in the AVN employee handbook. Sazzman also entered into a SalesLogix confidentiality agreement and signed copies of those agreements.

As a result of her position at AVN, Sazzman was privy to and became familiar with much of AVN’s proprietary and confidential information and trade secrets, states the suit. She had access to the information stored on the computers.

Accordingly, on March 13, 2009, “without warning” Paul Fishbein learned that Sazzman intended to quit AVN and accept a comparable advertising sales position with XBiz for higher pay. The suit claims that Fishbein offered to renegotiate the terms of Sazzman’s compensation package and Sazzman indicated that she would consider staying with them. A week later on March 20, once Fishbein was out of the office, Sazzman informed Darren Roberts that she was quitting immediately.

Sazzman, according to the suit, began working for XBiz the following Monday, March 23. But AVN also has reason to believe that prior to her departure, Sazzman “improperly and without authorization” accessed the SalesLogix database for the purpose of copying and transferring the trade secrets for use in her new employment. She did so unlawfully, the suit contends.

AVN feels that Helmy was aware of Sazzman’s intent to “abscond” with AVN’s trade secrets and hired her for that specific purpose. AVN also believes that Sazzman, prior to her departure, deleted a majority of the electronic correspondence she had sent out to advertisers and potential advertisers via AVN’s e-mail system. AVN also believes that Sazzman “effectuated” the destruction of this information in such a way as to make recovery of the information impossible.

AVN also alleges that Sazzman deleted the information in an effort to destroy evidence of her unlawful procurement of their trade secrets. AVN says that by deleting that information, Sazzman knowingly caused the transmission of a command to AVN’s computer system thereby intentionally causing damage to the system.

According to AVN, upon Sazzman’s commencement with XBiz, she began aggressively soliciting AVN’s current and prospective advertisers to bring their business to XBiz.

According to more allegations in the suit, Sazzman on behalf of XBiz and with Helmy’s knowledge and consent, made overtures to undercut AVN’s advertising rates in ways she could only have done so with access to and improper use of AVN’s trade secrets culled from the SalesLogix database.

AVN also contends that Sazzman, in order to win confidence of AVN’s customers, passed herself off, by ruse, as Sara Harter, another advertising account manager who was working at AVN.

“As soon as Sazzman started working at XBiz, Sazzman promptly contacted many AVN advertisers for whom Harter was the primary AVN contact. Sazzman contacted these advertisers by telephone and e-mail intentionally misleading such advertisers to believe they were communicating with Sara Harter.”

“All in an effort to trick such advertisers to speak with her,” states the suit.

As a result of Sazzman’s conduct, AVN has been damaged and will continue to suffer significant damages in amount far in excess of the jurisdictional minimum of the court, the suit states.

No dollar amounts are specified in the suit which asks for a trial.

The attorneys representing AVN are Lerman & Pointer LLP