OnlyFans Consulting Firm Faces Trade Secrets Lawsuit

An Arizona-based OnlyFans consulting firm faces a trade secrets lawsuit filed after a federal judge gave the case a go-ahead.

An OnlyFans consulting business, Liberty Risk Consulting (LRC), and Influenced Edge sued three former employees for allegedly retaining and using LRC's information in their rival business.

But before we get into the trade secrets case, let's answer the question you're probably asking if you're a day over "Gen-Z" age.

What is OnlyFans?

OnlyFans is a video-based social platform. OnlyFans creators can monetize their content through subscriptions. 

It was launched in 2016 by British businessman Tim Stokely.

But what has made it (and the creators on it) rich and famous is that this is mostly adult content.

But it's not all sexually explicit content. OnlyFans creators are a wide-ranging mix, from sex workers to musicians like Cardi B and sports stars like Tony Bellow. Everyone seems to have an OnlyFans account.

Celebrities often share behind-the-scenes footage and snippets of their personal lives on their OnlyFans page.

Two years after it was set up, OnlyFans was acquired by Fenix International. This is owned by Ukrainian-American entrepreneur Leonid Radvinksy.

Then came the COVID-19 pandemic, and the business boomed. During the peak of the COVID-19 crisis, the company's revenue shot up by a whopping 553% in 2020.

The OnlyFans model is unique. It takes a 20% commission from all revenues its creators receive through the platform. All the rest of it belongs to the creators. And they decide their own subscription fees that users must pay to access their OnlyFans page. An OnlyFans creator can make thousands of dollars on the platform in just a month.

Creators usually use other social media platforms like Instagram and TikTok, to promote their OnlyFans pages.

What are trade secrets?

According to the Uniform Trade Secrets Act, a trade secret "means information, including a formula, pattern, compilation, program device, method, technique, or process, that:

(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use and,

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

Basically, anything that adds value to your business sets it apart from competitors and is known by a very small number of people can be considered a trade secret. And it needs to be protected so nobody else can use it to their advantage.

Why is an OnlyFans consulting firm facing a trade secrets lawsuit?

In February 2023, the OnlyFans platform had nearly one billion monthly user visits worldwide.

With so much money at stake, many consulting firms have started offering services for creators. They can help an OnlyFan creator optimize pages, devise marketing strategies, and manage content.

Liberty Risk Consulting is one such Arizona-based consultant. The marketing agency describes itself as “an independent consultant that assists in the growth and monetization of social media accounts.”

The company's owner and CEO, Michael Morgan, recently sued three former employees- Brittany Paduganan, Amy Noss, and Joyce Morgan. These three employees were executives at LRC and allegedly bound by nondisclosure, noncompete, and nonsolicitation agreements. 

The suit also names Keith Hickey, a former senior account manager at LRC. He later worked as an independent contractor with Paduganan, Noss, and Morgan.

According to the complaint, the former employees "accessed and misused" LRC's confidential client and business information. And they allegedly poached clients for their new rival LLC. Their business is called ETBP Enterprises, and it operates as Thrive Talent Management.

Other allegations also include that "Noss improperly accessed password-protected business records/files after she resigned" and that Hickey:

"improperly provided both password access to Plaintiffs' OnlyFans account and client information to Paduganan - who used access and information obtained at her behest to misappropriate other business assets."

What laws can be applied to this case?

The complaint seeks redress under the following laws:

1. Misappropriation of Trade Secrets under the Federal Defend Trade Secrets Act ("DTSA")
2. Pennsylvania Uniform Trade Secrets Act
3. Misappropriation of Confidential Business Information under Pennsylvania law
4. Violation of the Federal Computer Fraud and Abuse Act ("CFAA")
5. Breach of Contract
6. Tortious Interference with Existing Contractual Relationships
7. Unjust Enrichment
8. Unfair Competition
9. Civil Conspiracy
10. Defamation Per Se, Defamation and Commercial Disparagement/Trade Libel

The defendants had filed for a motion to dismiss. They claimed that the Pennsylvania District Court did not have personal jurisdiction over her “based solely on events that allegedly occurred over the internet.”

But on August 29, 2023, U.S. Magistrate Judge Lisa Pupo Lenihan concluded that "Plaintiffs have more than sufficiently established the basis for Constitutional exercise of this Court's specific personal jurisdiction over the Paduganan Defendants as to all claims raised."

This means the case now has the green light to proceed in court.

Trade Secret Protection in the Digital Age

This case has put a spotlight on what it means to protect trade secrets in the age of digital technology and social media.

Old-school trade secrets like the Coca-Cola formula are stored in an actual vault. But, if you have an online business, protecting your trade secrets in the digital world may require you to adopt new and innovative practices such as:

• Develop a robust cybersecurity strategy
• Change passwords to all your accounts at frequent intervals
• Register all possible trademarks, copyrights, and patents

Some of these may seem time-consuming and complicated at first. But it's worth it if this helps you avoid costly litigation battles down the road. As more businesses take inspiration from successes like OnlyFans, the digital universe is only going to get more crowded. And you had best be prepared for the rush hour.