Because I Said So

Let’s get this out of the way: the defendants in this case are not sympathetic.  The complaint paints them as sneaky, conniving and ham-handed about it.  Since this is a motion to dismiss, we have to assume that’s true.  For non-lawyers, a motion to dismiss is the legal equivalent of “so what.”  It means, even if everything you say is true, the law says you still have no case.  

According to the complaint, employees from one software company visited a competitor’s website and requested a 30 day free trial of the competitor’s software.   The employees used a fake name, pretended to be from a fake real estate company and provided fake addresses.  The competitor’s salesman agreed to set up a 30 day trial environment, upon acceptance of a End User License Agreement (“EULA”).  The employees agreed.

The EULA said that “the Software is provided to User for evaluation purposes," and that it is a "license to use the software solely for the purposes of testing and evaluating the software." The EULA also said that the user "shall not engage in competitive analysis." 

Over the next 30 days, the employees accessed the trial environment 43 times and asked the salesman a number of questions.  But that just wasn’t enough, so they requested another two weeks of access.  That prompted the competitor’s salesman to arrange a conference call.  When the employees called in, the salesman noticed that incoming number didn’t identify a bogus real estate firm, it identified a competing software company.  The lawsuit followed in short order.

In their trade secret claim, the plaintiff alleged that the competing employees:

learned-technical details about the… Software and its functionality, and acquired information about [Plaintiff’s] confidential and proprietary marketing strategies and pricing information, which information constitutes [Plaintiff’s] confidential, proprietary, and trade secret information.

That may be, but none of things things qualify as “trade secrets,” said the defendant in its motion to dismiss.   According to the defendant, software functionality, marketing strategies disclosed through the sales process and pricing aren’t really secrets.  Those are things that are widely known to customers and prospective customers.  The only “functionality” that might qualify as a trade secret is source code, and nobody alleged that they had access to that.

The court agreed that the defendant’s arguments made sense, if not for the EULA.  According to the court, the EULA said that all of these things were secrets and if every other customer had made the same agreements, then the plaintiffs may have a case.  Motion to dismiss denied.

It’s tempting to think of motions to dismiss as the land of law exams, near fantasy worlds where courts indulge in esoteric discussions about what might be possible.  Their effects are starkly practical.  For many defendants, the cost of fighting a case past such a motion just isn’t worth it.  For them, every esoteric possibility is a cold, economic reality. 

Like I said before, the defendants in this case aren’t all that sympathetic.  But, I’ll bet you’ve clicked through hundreds of EULA’s that you’ve never even read.  Any one of those could be transforming widely held information into potential trade secrets—and many probably are.  Just because they said so.

You can read the full opinion here.