A contract between a company and its supplier states that the supplier shall not “develop any other product derived from or based on” the company’s product. Can the company enforce this provision against the supplier when the supplier develops a product that does not appropriate any trade secrets or novel features of the company’s product?
Not according to a decision of the First Circuit issued on September 4th.
Where the features of the product are well known in the art, and there has been no appropriation of novel features of the product, such a contract provision cannot be used to enjoin sales of the “derived” product: “a private contract may restrict copying of an idea that was not in the public domain at the time of contracting, but may not withdraw any idea from the public domain.”
The ConnectU/Facebook legal saga is truly astounding. Imagine a mature Oak tree. Now give the it properties of Kudzu vine (the “vine that ate the South”). Each branch of this tree is another lawsuit involving ConnectU, Facebook, the principals, and their lawyers.
Now, a new branch has burst forth. Wayne Chang has sued ConnectU and its lawyers in Superior Court Business Litigation Session in Suffolk County, Boston, claiming that Chang is entitled to as much as 50% of the value of the ConnectU/Facebook settlement (so called, since ConnectU has challenged the finality of the settlement).
… says Professor Eric Goldman, in his apologetically belated comments on Harris v. Blockbuster Inc., (N.D. Tex. April 15, 2009). I discussed this case briefly in April, shortly after the decision was published. To reprise, the court held that an arbitration clause in Blockbuster’s online t’s and c’s was unenforceable because Blockbuster was permitted to unilaterally amend the contract without notice.
Prof. Goldman’s take on it (in addition to the title of this post), is –
This language has a significant risk of killing the entire contract, which would strip away a lot of very important provisions that should be/need to be in the contract. So far Blockbuster has only lost its mandatory arbitration clause, but it’s possible other important risk management clauses (warranty disclaimer, liability limits, dollar caps, etc.) will similarly fall. If those clauses fail, let the plaintiff feasting begin!
Here’s an interesting case out of the U.S. District Court, Northern District of Texas. In Harris v. Blockbuster the court refused to enforce an arbitration provision in Blockbuster’s online click-wrap agreement. The reason was that Blockbuster’s click-wrap contract was unilaterally modifiable by Blockbuster. Here is the key paragraph, which is still on the Blockbuster Online site as of today:
These Online Rental Terms and Conditions are subject to change by Blockbuster at any time, in its sole discretion, with or without advance notice. The most current version of the Online Rental Terms and Conditions, which will supersede all earlier versions, can be accessed through the hyperlink at the bottom of the blockbuster.com site. You should review the Online Rental Terms and Conditions regularly, to determine if there have been changes. Continued use of your BLOCKBUSTER Online membership constitutes acceptance of the most recent version of the Online Rental Terms and Conditions.… Read the full article