A recent trade secrets decision out of New Jersey against The Weather Channel illustrates some interesting trade secret issues that arise in licensing agreements — namely, to what extent can a licensee extract itself from a licensing agreement when it concludes that it can gather the subject matter of the license from other publicly available places (or come up with the information more cheaply).
In Events Media Network, Inc. v. The Weather Channel, 2013 U.S. Dist. LEXIS 97514 (July 12, 2013), U.S. District Court Judge Robert P. Kugler denied a motion to dismiss filed by The Weather Channel, finding that the plaintiff Events Media Network, Inc. (EMNI) had presented sufficient allegations of trade secret theft to move the case forward. EMNI contends that The Weather Channel took proprietary information that was supplied under their license agreement and improperly used it after the license expired.
The case involves one of the thorniest issues that arise in trade secret litigation — whether a compilation of publicly available information can qualify as a trade secret. In its Amended Complaint (attached as a PDF below), EMNI described its business as collecting, reviewing and distributing information for various local and national events and attractions. While it conceded that none of the individual bits of data gathered together was confidential, EMNI argued that once that information was gathered together from the various sources using a custom built database, it qualified as a trade secret.
Applying Georgia’s Uniform Trade Secret Act, Judge Kugler agreed, at least at this early stage of the litigation, that EMNI had identified sufficient evidence that the information it supplied to The Weather Channel, organized in the fashion that it was, constituted a trade secret. In this respect, his decision rests on solid ground and is consistent with the pleading standards that benefit a trade secrets plaintiff at this early juncture of the case. Todd Sullivan notes that The Weather Channel does not appear to contest that it used the information and predicts the case will be mediated or settled soon.
I Agreed to What?!!! The case raises another interesting trade secret issue that has been in the news lately — whether the terms of a written contract can trump trade secret law. According to the Amended Complaint, EMNI and The Weather Channel contractually agreed that the information supplied by EMNI under the license agreement was proprietary. As a result, EMNI argued that provision should estop The Weather Channel from claiming otherwise.
A recent case out of the U.S. Court of Appeals for the Federal Circuit, Convolve and MIT v. Compaq and Seagate, held that the contract between the parties may be controlling on the question of whether information qualifies as a trade secret and that the parties can decide between themselves what needs to be done to ensure trade secret status. In that case, the Federal Circuit found that the plaintiff’s failure to designate information as “confidential” — as was required under a non-disclosure agreement — doomed the plaintiff’s trade secret claim (for more on the case see Dennis Crouch’s post in Patently O Blog as well as Jason Stiehl’s post for Seyfarth Shaw’s Trading Secrets Blog).
Here, EMNI used the language of the contract to its advantage and argued that The Weather Channel had conceded the proprietary nature of the information under the license. The lesson? In written agreements negotiated between sophisticated commercial parties, courts will frequently defer to the language of the agreement.
Quick Takeaway for Licensees: Do your due diligence and if you have skepticism over the value of what you are going to be licensing, it may be best to say “no thanks” to the deal.
Quick Takeaway for Licensors: The language of your agreement may prove critical so make sure that your licensee concedes that the information that you are supplying is protected and proprietary. More often than not, the court will apply the language agreed to by the parties.