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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: December 26, 2018

Idea Misappropriation Claims Dismissed on Summary Judgment for Lack of Novelty

On December 5, 2018, Justice Scarpulla of the New York County Commercial Division issued a decision in Hyperlync Tech., Inc. v. Verizon Sourcing LLC, 2018 NY Slip Op. 33123(U), dismissing a claim for idea misappropriation on summary judgment for lack of novelty, explaining:

To prove a claim for misappropriation of ideas, a plaintiff must establish: (1) a legal relationship between the parties in the form of a fiduciary relationship, an express contract, implied contract, or quasi contract; and (2) that it possessed an idea that was novel and concrete.

Verizon argues that it is entitled to summary judgment on this claim because Hyperlync’s idea was not novel and was, at best, a mixture of known ingredients. Hyperlync admits that novelty does not usually encompass ideas that are in the public domain or comprise an adaptation of existing knowledge but argues that the standard of novelty is not novelty to the world but rather novelty to the buyer. In support of this standard, Hyperlync cites to a federal court decision, Nadel v. Play-By-Play Toys & Novelties, Inc., 208 F.3d 368 (2d Cir. 2000). At least one state court has deemed incorrect Nadel’s interpretation of novelty. In the absence of any state court decisions supporting the novelty to the buyer standard, I decline to follow Nadel.

When applying the standard of novelty to the world in this case, Hyperlync’s claim for misappropriation of ideas fails. Although Hyperlync argues that the Phone Cloner’s bundle of functionality was unlike other products on the market, it has failed to raise an issue of fact as to the app’s novelty. In fact, the Morrow and Berger depositions confirmed that the idea for data transfer between two phones via Wi-Fi was already in the public domain at the time of the Phone Cloner app. Verizon’s evidence showed that the following applications for Wi-Fi data transfer pre-dated Phone Cloner: Zapya, Shareable, HTC Transfer Tool, and My Backup Pro.

Idea misappropriation claims cannot stand where, as in this case, the material was in the public domain. I find that even if Hyperlync’s app was a creative bundling of known elements, this does not render it novel. Hyperlync has failed to raise a fact issue regarding novelty and I therefore dismiss the misappropriation of ideas cause of action.

(Internal quotations and citations omitted).

The law protects intellectual property in a number of ways, but that protection is not unlimited, as this decision shows. We frequently litigate intellectual property claims, including trademark, copyright and trade secret claims. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions about whether you have, or face, a claim for theft or infringement of intellectual property.

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