12:38pm PT by Eriq Gardner
Arianna Huffington Settles Website Theft Lawsuit
Huffington Post co-founders Arianna Huffington and Kenneth Lerer have settled a lawsuit that claimed they stole the idea behind the site from two Democratic consultants.
The lawsuit came in New York Superior Court from Peter Daou and James Boyce, who alleged that in 2004, they gave the HuffPo founders a memorandum that proposed a website and blog collective to serve as a counterpoint to prominent conservative sites like Drudge Report. The lawsuit further claimed that Huffington had agreed to participate in the project, present it to potential investors, and through a series of meetings had formed a joint venture with them to develop the site. Huffington took plaintiffs' ideas, the lawsuit added, and used it to raise $1 million behind the plaintiffs' backs.
The judge in the case dismissed contract claims, but allowed claims for idea misappropriation, fraud and unjust enrichment to advance.
Throughout the case, Huffington has denied any theft and in a motion brought late last year, attempted to win the case on summary judgment.
"The combination of pre-existing elements, what plaintiffs allege here, is not novel as a matter of law," read the motion. "The record is clear, and plaintiffs concede, that each of the elements of their alleged idea existed in varying forms, on countless websites, prior to November 2004, when plaintiffs disclosed their idea to defendants."
At a hearing last February, Judge Charles Ramos threw the case to trial and engaged in an interesting debate about the nature of novelty on the Internet with Huffington's attorney Leslie Fagen.
"Every idea that's protected as novel is not really novel in that it's based upon something that came before it," said the judge. "Every tool has elements that are not novel, but at some point that tool becomes novel. There's something that's added to the existing elements that makes it protectable. It seems a bit arbitrary and it's very, very difficult to define, particularly difficult when we're not dealing with an object here, we're dealing with an idea that exists in an area that's very new: social media, the Internet."
"Yes," responded Fagen. "Ideas come from older ideas, we all know that, but the courts, because they know they are dealing with the creation of a property right when they say this is novel, they have to be very careful. ... You cannot allow, I think, novelty to arise from taking known ingredients and putting them together, especially when [plaintiffs] agreed. Look, the record shows all of these websites have all of these elements, every single one of them: MSNBC, Fox News, AlterNet, Salon. They existed."
The attorney continued.
"So they're saying, 'Oh, scoops and exclusives; online, offline, newspapers have exclusives. News aggregation, that's been known for years. Reader commentary, known for years. Op-eds and opinions by third parties; it's not new."
But the judge refused to back down.
"What bedevils me about this case is that all they need is one element that's novel. One, that's it. That's what makes it novel."
The terms of the settlement haven't been revealed. But money is changing hands, as HuffPost's statement below confirms. Over at Forbes, Jeff Bercovici reports that those who held shares or options at the time of HuffPo's $315 million sale to AOL have been contacted by shareholder services to notify them that $9.8 million held in reserve pending the outcome of the case has been released and is being paid out.
The plaintiffs have put out a statement about the resolution.
According to Daou:
"I am grateful to have settled my dispute with Arianna Huffington over the founding of The Huffington Post. Having devoted much of my personal activism to the challenges facing girls and women and having been privileged to serve as an adviser to Hillary Clinton in her campaign to crack the ultimate glass ceiling, I know firsthand the obstacles Arianna has faced in her quest to reshape the media landscape. In light of my experience, I will be establishing the Daou Foundation (daoufoundation.org) to provide grants to young women activists and entrepreneurs who are using social media and technology to change our world for the better."
Huffington Post has sent us its own statement:
"We are very happy that this has concluded, and very happy with the settlement agreement, which speaks for itself: All claims against Arianna Huffington and Kenneth Lerer are dismissed with prejudice, which claims plaintiffs have now determined are without merit. Plaintiffs now acknowledge that Arianna Huffington and Kenneth Lerer committed no acts of wrongdoing. AOL, Inc. shall pay all sums due and owing under the terms of a settlement between AOL, Inc. and plaintiffs."