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Every San Diego business has valuable intellectual property (“IP”) including:
- Copyrightable materials such as slogans, advertisements, website copy, etc.
- Trademarks such as logos
- Potentially patentable inventions, designs, and/or methods — not every business has these, but it is surprising what might be patentable
- Trade secrets
Because intellectual property is valuable, every business must have strategies for protecting it. Because the various forms of intellectual property are different, your business must have different protection strategies and, importantly, overlapping protections. Such protections can add significant value to the business if you are planning to sell or if you are seeking investors or if lender financing is contemplated.
A recent case decided by the federal Court of Appeals in San Francisco shows why a strategy of overlapping protections is necessary. See Experian Information Solutions, Inc. v. Nationwide Marketing Services Incorporated, Case No. 16-16987 (US 9th Cir. June 27, 2018).
San Diego Corporate Law: Multiple And Overlapping Intellectual Property Protection Strategies are Needed
At issue in Experian Information Solutions was an intellectual property fight over part of Experian’s database. The business of Experian is to compile and then license to marketers information in various and extensive databases. As the case reports, since 1998, Experian has compiled what they now call the Consumer View Database (“CVD”) that has a copyright registration for the “selection, coordination, arrangement and compilation of data. . . .” The CVD contains more than 250 million records, each pertaining to an individual consumer, and includes hundreds of “fields,” each denoting a particular attribute of the consumer, such as age, earnings, or purchase habits, as well as behavior predictions. This litigation concerns compiled pairings of names and addresses.
Note that Experian filed for copyright protection of its databases. Although not reported in the case, it is likely that some aspects of the databases are trademarked. In addition, as discussed below, Experian takes active steps to protect the databases as trade secrets under California law. In other words, Experian has multiple and overlapping intellectual property protections in place. As the case shows, the multiple and overlapping protections were needed since the Court of Appeals knocked out one layer of protection – copyright, but another layer — trade secrets, was there to still protect the value of the intellectual property.
In the case, Experian was in a legal fight with a competitor called Nationwide Marketing Services, Inc. At issue specifically was list of children’s birth dates paired with the names and addresses of the children’s parents. Nationwide attempted to market and license that database to various marketers and Experian got wind of the efforts. Experian then compared its database to the Nationwide data set and found a 94-97% overlap. Litigation ensued. Experian claimed that Nationwide was violating its copyrights and its trade secrets.
In response, Nationwide argued that the copyright filing was invalid since, under applicable US Supreme Court precedents, lists are not copyrightable — lists like in a phone book. At the trial level, the US district court agreed. The database lists did not have sufficient “creativity or originality” to be eligible for copyright protection. Further, the trial court held the lists did not constitute a trade secret under California law.
On appeal, the Court of Appeals agreed in part and disagreed in part. The Court of Appeals disagreed that the database lists were not copyrightable at all. Rather, the list had a limited copyright. However, based on the limited nature of the copyright, it was clear that Nationwide had not infringed on the Experian limited copyright. The trial court was affirmed on that ground. As for the trade secret issue, the Court of Appeals reversed entirely, and that part of the case was sent back for further proceedings. To establish trade secret protection, a company must show that its information or business method or system has economic value and that reasonable steps were taken to protect and keep as secret the information, method, or system. The Court of Appeals held that Experian had demonstrated that there was commercial value to the databases and that it had taken steps to maintain the secrecy of the databases. Furthermore, according to the court, there were some fact questions as to whether Nationwide knew or should have known it was acquiring a trade secret through improper means when it purchased the data. As such, that part of the case was returned to the trial court for further proceedings.
The case provides a clear-cut example of why overlapping and multiple layers of protection are needed for your company’s intellectual property. If one layer is defeated in court, then another layer of protection can “save the day.”
Contact San Diego Corporate Law
If you would like more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard provides legal services related to business intellectual property, private securities offerings/sales, the sale/purchase of a business, and for mergers and acquisitions. Mr. Leonard can also assist with setting up a new corporate entity, annual corporate maintenance, and can help review and draft business contracts. Mr. Leonard can be reached at (858) 483-9200 or via email.