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Business Observer Friday, Jun. 21, 2019 4 months ago

Counter punch: Irked entrepreneur hits back at rival

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The Penny Hoarder's experience in dealing with aggressive moves by a larger competitor shows how businesses can never let their guard down. Now a legal showdown looms.
by: Brian Hartz Tampa Bay Editor

Years of high-profile innovation and rapid growth have put a target on the back of The Penny Hoarder, a St. Petersburg-based personal finance advice website.

The company originated as a blog, written by founder Kyle Taylor, that detailed how he overcame crushing student loan and credit card debt. In less than a decade from that start, it grew into a $37 million enterprise with more than 80 employees — and a swanky office in the Tampa Bay Times building in downtown St. Petersburg.

“If it appears that someone is stealing your work, then you have no choice but to defend yourself if you have the resources to do so.” Jeffrey Lieser, attorney for The Penny Hoarder

Recently, with that target in the forefront, Taylor headed to court to protect the firm’s intellectual property. He filed a multimillion-dollar copyright infringement lawsuit in May against a larger competitor, New York City-based Fluent Inc., which operates websites called The Smart Wallet and The Bill Wizard.

Jeffrey Lieser, a Tampa-based attorney representing The Penny Hoarder, says the legal action offers a host of lessons for business owners.

“If you're putting out original work," he says, "whether you're an author of a book or have a web page or whatever the case may be, you can get copyright protection.”

The Penny Hoarder complaint, filed in U.S. District Court in Tampa, says Fluent Inc. not only copied the text, headlines and other editorial elements of its articles, but also designed its web pages to mimic The Penny Hoarder’s. Such unauthorized use is forbidden by the company’s terms of service.

Lieser says it’s common for competitors in the digital publishing space to illegally copy The Penny Hoarder’s articles. Most, however, comply with demand letters to take down content that too closely resembles copyrighted content.

“Ninety-nine percent of the time, people will respond, do a mea culpa and take the stuff down. That didn’t occur here,” he says, referring to the complaint against Fluent.

Fluent attorney Frank Jakes, also based in Tampa, declined to comment on the specific allegations, although he adds that he intends to file a motion to dismiss the case. “The client has a policy of not commenting on pending litigation,” he says. “So we're going to let the court filings and the court ruling speak for themselves and leave it at that.”

Lieser’s message to businesses that make money from copyrighted material is this: You can never be too vigilant. “You can regularly monitor what's out there on the web,” he says. “And if it appears that someone is stealing your work, then you have no choice but to defend yourself if you have the resources to do so.”

There are wrinkles to The Penny Hoarder case that transcend plagiarism. The lawsuit, for example, alleges Fluent hired a Penny Hoarder employee and ordered him to illegally obtain the password-protected source code that runs the back end of his former employer’s website. The employee, a web developer, had a non-compete agreement that forbade him from going to work for a direct competitor like Fluent, the lawsuit contends. 

In a deposition, that former employee says a Fluent IT project manager asked him to steal the source code, so Fluent could exploit it for financial gain. According to the complaint, the former employee "testified that he believes that, in retrospect, he was hired by Fluent in order to provide the source code.”

Penny Hoarder attorney Jeffrey Lieser. Courtesy photo.

Lieser says there’s a lesson in that, as well: Secure your internal computer networks. An ex-employee should not, under any circumstances, continue to possess valid login credentials. And just because someone signs a non-compete agreement doesn’t mean he or she will honor it.

Fluent poached four other Penny Hoarder employees, the lawsuit says, including media buyer Logan Riley, who also had signed a non-compete agreement. In January 2018, The Penny Hoarder sued Riley to enforce that agreement, and Fluent countersued. In a statement, Taylor — who declined to be interviewed for this story — calls Fluent’s lawsuit “frivolous” and says his firm won’t back down.

“Too many times we’ve heard about big corporations taking advantage of hard-working content creators who lack the resources to fight back,” Taylor says in the prepared statement. “We believe we have a duty to stand up for them and ourselves rather than stand idly by and watch it happen again. We remain committed to producing the best personal finance content and will defend our intellectual property vigorously."

In March, The Penny Hoarder laid off dozens of employees due to falling revenue. Although Lieser declines to draw a direct connection between the job cuts and Fluent’s alleged transgressions, he says it’s no coincidence his client seeks damages in the $10 million range.

“With any company," he says, "if there was a loss of millions of dollars, you would have to think it might have an impact on staffing considerations."

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