Law of Cards: A Little Bit Late, Beckett Alleges COMC Breached Contract
For the last few months, the Beckett v. COMC matter has stalled while it bounced between state and federal courts. This week, finally, the action is showing signs of starting.
To give a quick recap, this is the case where Beckett sued COMC for the alleged misappropriation of its trade secret information which included pricing and checklist data. COMC responded with abuse of process and breach of contract counterclaims against Beckett. These claims alleged COMC couldn’t have misused any Beckett trade secrets (if Beckett had any trade secrets) because there was a contract in place that allowed COMC to use all Beckett's data until April, 2014.
After a long pause where the parties argued about which court should hear the case (the state court won), last week, Beckett filed a motion to amend its complaint to add its own breach of contract claim against COMC.
Legal comment: Wait. Did Beckett just say, "You sued me for breach of contract? Well then, I'll sue you back for breach of contract!"?
Sure, it looks like a childish response to COMC's breach of contract counterclaim, but Beckett's claim is more subtle and, if allowed, could have an impact on this case.
Part of COMC's defense is that the shared Beckett data does not constitute trade secrets. If no trade secrets were shared, well, you can't have misappropriated any trade secrets. Beckett's new contract counterclaim hopes to cover the instance where if COMC prevails on its not-a-trade-secret theory, then Beckett can still say, "The contract was broader. It didn't just cover trade secrets. It covered all shared data and, therefore, since COMC still used our shared data after the contract was terminated, even though that information did not rise to the level of trade secrets, we still win."
If Beckett is allowed to add this claim to the case (it needs permission from the court first), it will give Beckett a broader action against COMC.
But it won't change the case's focus.
First, it's a hard sell to convince a jury that someone can misuse non-trade secret information (legal translation: that someone can misuse publicly available information). It just goes against the whole idea of "freedom of speech."
Second, Beckett alleges it terminated the contract in December. COMC, on the other hand, has what looks like good evidence that Beckett did not properly terminate the contract at that time. Therefore, the contract was valid until April. If that is so, whether the contract covered "trade secrets" or all shared "data," COMC's use of such trade secrets/data was allowed until April and Beckett loses the lawsuit.
Third, this new cause of action gives Beckett a tenuous window of viability. For this claim to be useful, Beckett would need to prove it properly terminated the contract. But COMC would have proven that Beckett's checklists and pricing information did not constitute trade secrets. Such a finding would be devastating to Beckett because it calls most of Beckett's business model into question.
Uncalled for legal commentary: "Yeah, you know all of that information you collected and created over the years, well it's been found by a court to be not protected by trade secrets, so pretty much anyone in the public can share it. But don't worry! We still have this narrow breach of contract claim against COMC that covers four months of time for which the damages would likely be the checks that COMC sent to you that you didn't cash during that time period!"
Now, Beckett's breach of contract claim should have been raised in its initial complaint. All of the information Beckett pleads in this "new" claim was in Beckett's possession at the time of filing. So, when it first filed the case, it dropped the ball by not including a breach of contract claim.
Legal aside: In my mind, Beckett also dropped the ball by not bringing a copyright infringement claim too. But hey, that looks to have been a strategic decision made by Beckett to stay in state court and out of federal court (legal translation: copyright claims can only be brought in federal court).
In my mind, a copyright infringement claim is stronger than a trade secret claim or even a breach of contract claim because copyright claims cover works/expressions/writings shared with the public too and only requires Beckett to prove 1) access by COMC and 2) copying by COMC of copyrighted (and copyrightable) materials. Beckett chose to do it the hard way.
I doubt Beckett's failure to bring a breach of contract claim from the start will penalize it. Broadening the focus of a case this early in an action is normally freely allowed, especially where the cause of action arises from the same underlying facts.
Legal translation: There are no new facts at issue. Everything was already teed up and because it's so early in the case, no one is unfairly hurt. So why not address it now?
Beckett should be OK. And, really, if it's not allowed to bring this claim in this suit, it could always bring a separate lawsuit against COMC alleging breach of contract.
That being said, I'll be interested to see if COMC opposes this amendment over the next couple weeks, and what its basis would be for such an opposition.
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