S.D.N.Y.: Marketing Concepts Are Not Trade Secrets

protecting trade secrets Recently, the Southern District of New York addressed whether marketing concepts can be trade secrets in Sarkissian Mason, Inc. v. Enterprise Holdings, Inc., 2013 WL 3585313 (S.D.N.Y. July 15, 2013).

Here, the plaintiff sued Enterprise (the rental car company) for breaching a nondisclosure agreement and misappropriating trade secrets. It alleged that it brought a proprietary business proposal to Enterprise that Enterprise then adopted for its own use.

After someone’s car is totaled, they often need a rental car for a while. A study showed that these people are more likely to buy the rental car, since they are effectively getting an extended test drive. Based on this study, Enterprise asked the plaintiff to develop a plan that makes it easy for renters to purchase their rental cars. They entered into a nondiscosure agreement and engaged in extended negotiations regarding the plaintiff’s plan.

In a nutshell, the plaintiff’s proposal involved placing a code on the rental car’s key fob. If the renter entered the code on the plaintiff’s website, the renter would get information about the car. The plaintiff would then forward the renter’s information to a car dealer, who could try to sell the car to the renter.

The plaintiff and Enterprise could not agree on the precise details for rolling out this program. The plaintiff wanted the renter to be directed solely to the plaintiff’s website, while Enterprise wanted to give auto manufacutrers the choice of using the plaintiff’s website or having the renters directed to the manufacturer’s website. This disagreement proved insurmountable, and Enterprise did not implement the plaintiff’s proposal.

Instead, Enterprise launched its own service, which allowed the renter to go directly to the manufacturer’s website. This case followed.

The court granted summary judgment in favor of Enterprise. Essentially, the court concluded that the plaintiff’s “proposal never progressed beyond a marketing concept, which was easily replicated.” The court focused on the public availability of the ideas behind the plaintiff’s proposal. And it cited to cases that differed between marketing concepts and the technical means for implementing those concepts. Here, the plaintiff solely came up with a concept based on publicly available information. It never developed any unique technology or processes to implement this concept. Thus, it could not establish the existence of a trade secret.

Since the marketing plan was not a trade secret, the plaintiff could only prevail if Enterprise breached the parties’ contract. But even though the plaintiff and Enterprise entered into a nondisclosure agreement, that agreement exempted publicly available information. Thus, the court rejected the breach of contract claim, again relying on the public availability of the information behind the plaintiff’s proposal.

This case shows that plaintiffs will have difficulty proving that marketing plans or concepts are trade secrets. A company offering such services needs to have its business partners execute nondisclosure agreements that specifically prohibit disclosure or use of the plan.

3 responses

  1. Hard to believe that the Plaintiff would execute an NDA that did not specifically prohibit disclosure or use of the plan. As to whether a marketing concept or plan can be a trade secret, it would seem that very little is different in this ruling from the general requirements under New York law, where courts have adopted the definition of trade secret from Section 757 of the Restatement of Torts: “A trade secret consists of a formula, process, device, or compilation which one uses in his business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Apparently, SDNY was not moved by Plaintiff’s steps to actually implement the concept. However, hard to implement until the idea was accepted by the receiving party.

    I would have thought that Plaintiff may have also had a claim for an Implied Contract for Idea Submission. Other states have applied this legal theory in cases such as the submission of a script to find liability if the receiving party used the idea for monetary gain where it was implied that the idea would be paid for if used.

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