American Business Training Inc. v. American Management Association

A New York State appeals court reaffirmed that an idea must be novel and original for a plaintiff to prevail on a misappropriation of idea claim. The plaintiff developed a five-day business seminar called “The 5-Day MBA” and spoke with the defendant about entering into a joint venture to market the seminar. The plaintiff described her seminar over the phone and mailed a copy of her brochure to the defendant. The following summer, the defendant began offering a five-day business seminar that was very successful.

The plaintiff sued for misappropriation of her idea, and the trial court dismissed her complaint, finding that her idea for a five-day course covering the basics of management, accounting, finance, sales, marketing, pricing, strategic planning, research and development, and human resources lacked novelty and originality. The appeals court affirmed, stating the basic and still enforceable rule for determining if a plaintiff has an enforceable property right in an idea: “An idea may be a property right. But when one submits an idea to another, no promise to pay for its use may be implied, and no asserted agreement enforced, if the elements of novelty and originality are absent, since the property right in an idea is based upon these two elements." (citing Downey v. General Foods Corp., 31 NY2d 56, 61 (1972)). Accordingly, the plaintiff could prevail only by “establishing that a condensed management or MBA program is so novel and original a concept that [she] is entitled to compensation merely for bringing the idea to [the defendant].”

The court rejected the plaintiff’s argument that the rule in Downey had been modified by Apfel v. Prudential-Bache Sec. (81 NY2d 470 (1993)), noting that the ruling of Apfel concerned a situation where the idea at issue was disclosed to the defendant, and the defendant, following its disclosure, entered into a contract to pay the plaintiff for it. In that situation, “the plaintiff need not establish that the idea was novel; the circumstances establish that the plaintiff provided something of value to the defendant, and therefore the plaintiff is entitled to the benefit that the contract provided for, in exchange for that consideration.” The court stated that the rule in Downey was only modified to the extent that a party who claims that an idea was misappropriated need not establish that the idea was novel and original if its value to the defendant was established by the creation of a contract between the parties following disclosure of the idea to the defendant.

The court relied on evidence showing that the defendant and other companies were already providing three, five and twenty day business seminars covering the same topics and concluded that the idea for a five-day business seminar was not novel or original.

The court also dismissed the plaintiff’s remaining claims including her claim for fraud: the plaintiff did not have a property right since her idea was not novel or original and “a plaintiff cannot be defrauded of property that he does not own” (citing Murray v. National Broadcasting Co., Inc., 844 F2d 988, 994 (2d Cir 1988)). The plaintiff’s claim for breach of a joint venture agreement was also dismissed because there was no evidence that the parties intended to be associated as joint venturers. The “claimed conversation between [plaintiff] and [defendant], in which [defendant] allegedly said that if AMA used the materials the parties would act jointly, is insufficient. Other than this vague conversation, there is no suggestion as to any discussion of pertinent and necessary details, such as how profits, losses, and expenses would be shared or what the contributions of the parties would be, and no evidence of an agreement as to how the partnership would be managed.” The plaintiff’s inability to demonstrate that her idea was novel also precluded relief on her claims for unjust enrichment and conversion.