Background

Between 2007 and 2013, the American hip-hop group, Wu-Tang Clan, secretly recorded the album, Once Upon a Time in Shaolin, as a commentary on the crisis in the music industry and the “devaluation of music in the digital era.” Wu-Tang Clan produced only one hard copy of the album, and it never had a commercial release. In 2015, Once Upon a Time in Shaolin was purchased by Martin Shkreli for 2 million dollars. However, the album also came with strict restrictions regarding how/when/where the album could be played and/or reproduced for the next 88 years.

After Shkreli was convicted of securities fraud in 2017, the album was sold in a forfeiture order and eventually purchased by PleasrDAO, a crypto company that “collects and publicly displays culturally significant media and materials with the intent of creating ecosystem experiences.”

Upon his release from prison, Shkreli revealed he made and shared multiple downloads of the album, despite no longer owning the album and the accompanying rights. Shkreli then hosted a live-streamed listening session on “Spaces” and played music from the album for almost 5,000 listeners.

Shortly thereafter, PleasrDAO filed a lawsuit, claiming violations of the Defend Trade Secrets Act and misappropriation of confidential information/trade secrets, among other things, and Shkreli filed a subsequent motion to dismiss the complaint in its entirety for failure to state a claim.

Case

In a surprising move, Judge Pamela Chen refused to dismiss the trade secrets claims, allowing the possibility that the one-of-a-kind Wu-Tang Clan album can constitute a trade secret.

Weighing the six Integrated Cash factors (which determine whether information qualifies as a trade secret) and the “unique facts of the case,” Judge Chen found that PleasrDAO adequately pleaded the trade secret claims.

Specifically, of the six factors, Judge Chen gave strong consideration to the following: that 1) the music is generally unknown to the public at large (given it was never commercially released), 2) PleasrDAO took numerous efforts to keep the music secret, 3) the album is valuable becauseof its secrecy, and 4) the album cannot be easily acquired or duplicated.

This is not the first case to attempt to claim a musical work as a trade secret—for example, unreleased Prince and Janet Jackson albums were at issue in Paisley Park Enters., Inc. v. Boxill and Anderson v. Jackson.

However, it appears that the primary difference between these cases and the current case is PleasrDAO’s business model around the album. Judge Chen noted, “The independent economic value of the album comes from plaintiff’s ability to exploit its exclusivity to create an ‘experience’ that its competitors cannot, rather than from a public commercial release or from traditional forms of musical distribution.”

Unlike Prince’s and Janet Jackson’s unreleased music, the Court found the Wu-Tang Clan album derives independent economic value because of its secrecy, whereas the unreleased recordings would derive their value from the right to sell them to the public.

In her decision, Judge Chen acknowledged that “the application of trade secret doctrine to the unique facts of this case is unchartered territory.” The Court noted whether Once Upon a Time in Shaolin is a trade secret is ultimately “an issue of fact.”

Regarding the other claims, the Court dismissed PleasrDAO’s claim for enforcement of the Forfeiture Order due to lack of standing and dismissed the claims for tortious interference and unjust enrichment due to preemption by the Copyright Act. In addition to the trade secret claims, the Court also upheld PleasrDAO’s claim for recovery of chattel/replevin.

What does this mean?

If PleasrDAO is successful, this could broaden the scope of trade secret protections to cover artistic works, allowing additional avenues and methods for artists and creators to protect their works.

The case sets out a potential framework or business model where artistic creations could receive trade secret protections if it met certain criteria around exclusivity, access, and value.

That said, this case is an outlier and a perfect storm of circumstances. While a favorable decision could not guarantee that other musical or artistic works could clear the high standard for a “trade secret,” it would provide a potential roadmap for how to secure additional protections for valuable intellectual property.