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MAY
30
3 MOS

Was This the Real Reason Why Amazon Fired a Former Netflix Licensing Guru?

Last month, Jerry Kowal claimed a "blacklisting" in the digital video industry. Now, Amazon offers a possibly instructive explanation on why a judge shouldn't allow his lawsuit.

Do you access your company e-mail on your personal smartphone? Ever do work on your home computer? If so, you're not alone, but a pending lawsuit from a former Netflix executive named Jerry Kowal might demonstrate why such habits aren't particularly wise.

In early April, Kowal claimed in a lawsuit against Netflix and Amazon that he was blacklisted from the digital video industry. He's suing over his termination as well as an alleged conspiracy to defame him. On Wednesday, Amazon seized upon one casual admission in Kowal's lawsuit -- he may have retained some of his ex-employer's business information on personal devices -- and is using it in an attempt to defeat his claims.

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At Netflix's Beverly Hills office, Kowal was the director of content acquisition, responsible for licensing television and film content for the company's subscription video-on-demand service. In June 2013, after witnessing a "cold and hostile" environment at the digital giant, Kowal gave notice of his resignation. He took a job at Amazon, which allegedly prompted Netflix executives Ted Sarandos and Reed Hastings to publicly state that Kowal would "never work in this industry again."

His tenure at Amazon was short.

Just a few weeks after Kowal had joined Amazon, Sarandos and Hastings are said to have announced to approximately 200 employees and board members that Kowal was under investigation for giving confidential information to Amazon and using the information to compete against Netflix. Netflix's lawyers soon sent Amazon's legal department a letter demanding access Kowal's personal computer and email accounts to conduct a forensic analysis of whether the Netflix documents had been disseminated to Amazon.

Kowal then met with one of Amazon's outside lawyers.

According to his complaint, "Kowal acknowledged that some Netflix information may still exist on some of his personal devices from his prior work at Netflix but he emphatically denied the accusations in the Netflix Demand Letter that he had given any such information to Amazon or used it to otherwise compete against Netflix."

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At first, Amazon seemed satisfied, proposing joint legal representation. For Kowal's part, although he says he was suspicious of Netflix's motives, he relinquished his personal devices in the interest of clearing his name and staying in his new employer's good graces. A third party investigated the devices, and the result of the probe, he says, cleared him of suspicions of sharing proprietary information. Nevertheless, on July 31, 2013, he was terminated.

Kowal is now seeking to hold Amazon liable for wrongful termination in violation of public policy. As to which public policy, Kowal's complaint points to California Business and Professional Codes 16600 and 16700 -- aimed at discouraging non-competes.

In seeking to exit the lawsuit, Amazon nods in a demurrer motion (read here) to Kowal's admitting "he came to work at Amazon possessing Netflix's business information on his computer." The defendant states that "neither (of Kowal's referenced California statutes) prohibits employers from responding to revelations that employees have retained electronic business information of competitors, or to allegations by the competitors that the information is confidential and subject to misuse."

Amazon warns of the consequence of letting Kowal pursue his claim. 

"Ultimately, were  Kowal's broad proclamation of 'employee mobility' public policy to be adopted, California employers would be left with a Hobson's choice when their employees are accused by former employers of having unlawfully taken confidential information: either (1) retain such an employee, defend a lawsuit brought by the former employer, and risk subsequent similar loyalty breaches by the employee, or (2) terminate the employee and face an action for wrongful termination in violation of public policy. No California public policy requires that 'choice.'"

Kowal might argue that Amazon is seizing upon the pretext of what was on his personal devices for firing him. In his lawsuit, he makes an observation that few have commented upon: that Netflix and Amazon are more than competitors. Yes, the two companies go head-to-head on digital video streaming platforms. Amazon Prime Instant Video is certainly Netflix's biggest rival. But Kowal believes the relationship between the two companies is more complicated.

The complaint states, "Netflix is one of Amazon Web Services' most significant customers. Annually, Netflix pays Amazon hundreds of millions of dollars for use of AWS's cloud computing/storage platform service, which supports the entirety of Netflix's operations, including storage of all content that is streamed to Netflix users... Kowal is informed and believes that Netflix asked Amazon to terminate Kowal's employment with Amazon in order to restrain him from competing with Netflix, and that Amazon acquiesced because Netflix was a valued Amazon customer."

This belief is hardly conclusive evidence that the two companies were nefariously cooperating with each other. On the defamation front in this case, for instance, Amazon says there's no allegation it knew of nor aided any of Netflix's statements that allegedly damaged his reputation. It also says it had no duty to disclose the results of its own internal investigation once Netflix started accusing him of being up to no good.

E-mail: Eriq.Gardner@THR.com
Twitter: @eriqgardner