Marketing Concept Not a Trade Secret

On July 29, 2013, in Trade Secrets, by Brian A. Hall

UnIntellectual Property (UnIP): Trade Secret for Marketing Concept

The United States District Court for the Southern District of New York has held that Enterprise, the rental car company, did not misappropriate the trade secrets of a digital marketing agency, AutoMatic.  Therefore, it granted summary judgment to Enterprise.

The trade secret at issue was embodied in five PowerPoint presentations and related to Enterprises belief that it could “monetize the results of a study (the “Polk Study”) showing that consumers renting cars in the “insurance replacement market” are more likely to buy the cars they are driving than they otherwise would be because they are in effect test-driving the car. Consumers in the insurance replacement market are those whose insurance paid for a rental car replacement vehicle because their car was damaged or “totaled” in an accident, and therefore these consumers are very likely to be in the market for a car.”  Enterprise entered into an non-disclosure agreement (NDA) with the digital marketing agency who then pitched the following concept:

1) Present an auto manufacturer with the marketing program, showing them that certain areas are ripe for “conquest”—namely a geographic area where the manufacturer could place its fleet with Enterprise in an effort to grow the manufacturer’s market share through the insurance replacement market.
2) When the consumer arrives at the Enterprise rental company, tell them about the opportunity to buy the type of car they are driving.
3) Place a QR code on the car’s key fob and/or elsewhere in the car that would lead the consumer to a website built and operated by AutoMatic. The website would contain marketing content “specifically designed to persuade them to purchase the same model car they were driving.”
4) The consumer could then opt into the program and request a price quote for the vehicle. These “leads” would be sent to dealers who could contact the consumer to pursue a sale.
5) Consumers who opted in also would receive emails from AutoMatic providing them with information such as current sales on the model they drove.
6) AutoMatic would make money by selling the leads to the dealers.

Despite negotiations between the parties for the creation and implementation of such a concept, it never materialized.  Instead, Enterprise chose another vendor, OnRamp, who initially put QR codes in select Mazda6 vehicles.  “When a renter scans the QR code with their phone, the phone opens a mobile-optimized website built by Enterprise called OnRamp Concierge, which is specific to each make and model of car. OnRamp Concierge provides links to local attractions, local deals, and the location of nearby gas stations. OnRamp Concierge also provides a link to car manufacturers’ websites or videos if the manufacturer elects to provide links to the material from the OnRamp Concierge. The OnRamp Concierge also links to more information about the car such as model information, pre-existing Enterprise websites for car rentals or purchases of used Enterprise vehicles, and links that send users to manufacturers’ “dealer-finder” pages, where a user can put in their zip code or use their smartphone’s GPS to locate a local dealer.”

At the outset, the Court recognized that Enterprise came to AutoMatic with the Polk Study concept, Enterprise had already used numerous advertising tools for the benefit of car manufacturers, including Chrysler, and that QR codes were a common advertising tool.  Thereafter, the Court choose to apply the Missouri Uniform Trade Secrets Act (MUTSA), after some discussion regarding conflict of laws and the New York common law test.  First, it identified the trade secret as a “buying service using ‘mobile engagement’ technology to connect renters and vehicle manufacturers … for the purpose of generating new car sales for [manufacturers].”  AutoMatic wanted a broader identification of its trade secret, which the Court refused to grant noting that doing so would render the trade secret “insufficiently defined.”  More importantly, the Court noted that “the broad concept of connecting car consumers to information about a car through their smartphone—QR code or otherwise—was already in the public domain.”

Second, the Court analyzed whether the concept is in fact a secret.  “The AutoMatic Buying System was not sufficiently secret to merit legal protection as a trade secret. All of the component parts of the idea were publicly known and in use before Plaintiffs presented their proposal to Enterprise. Even though the combination of ideas into a single program may have been novel, the proposal never progressed beyond a marketing concept, which was easily replicated. Plaintiffs never developed the technology or logistics to implement the program, which at that later stage might have qualified as a trade secret.”  It ultimately concluded that it was easily duplicated.  In doing so, the Court distinguished between publicly available advertising ideas, and the private technology developed to execute the ideas, and recognized precedent that marketing strategies are not trade secrets where the plaintiff “failed to explain what particular information about the particular … marketing techniques are not already public [and] are not already commonly known in the industry.”  Thus, it held that “AutoMatic Buying Service is a marketing plan like those in these cases, comprised of a collection of marketing ideas in the public domain pieced together in a novel, but easily duplicated, manner.”

Third, the Court held that the concept does not have value from not being known or readily ascertainable.  In doing so, the Court stated that the fact Enterprise did not choose the system, and AutoMatic had not found anyone else to choose it, is indicative of little value.  “No matter the hypothetical revenue a marketing program might generate, an idea has commercial value only if there is a market for it and a willingness of its target audience to implement it.”

“The components of the system are widely known, and the concept as a whole is of limited value because it is readily ascertainable. Thus, AutoMatic Buying System as an unexecuted concept is not a trade secret as a matter of law.”

This must have been tough for Plaintiff, who undoubtedly spent significant resources in hopes of finalizing an Agreement with Enterprise for the development and implementation of the concept discussed.  Unfortunately for them, this Court did not believe a hypothetical marketing concept qualified as a trade secret, despite noting that the technology developed to execute the ideas may have.  I doubt, however, that even the implemented technology may have suffered the same fate in light of the underlying ideas and technology being the public domain.  Perhaps a combination trade secret claim would have existed, but we will never know.
Sarkissian Mason, Inc. v. Enter. Holdings, Inc., 11 CIV. 09472 LGS, 2013 WL 3585313 (S.D.N.Y. July 15, 2013).

 

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