Have you ever had a brilliant business idea, only to discover years later that someone else has beaten you to market? If you are a professional athlete, you might break your hand punching a fire extinguisher or picture frame in frustration. If you are a web developer, you might indignantly exclaim, “They literally stole my idea!” And if you are a New York County Commercial Division Justice (or a semantic pedant), you would reply that the idea has not actually been stolen unless the alleged thief erased it from the plaintiff’s brain.
Such is the state of conversion of intangible property in New York County, as recently expressed by Justice Kornreich in MLB Advanced Media, L.P., et al. v. Big League Analysis, LLC. Big League Analysis, LLC (“BLA”) alleged that it contracted with MLB Advanced Media, L.P. (“MLB”) to develop youth-oriented baseball content and services that would be used on Major League Baseball’s websites. BLA further alleged that at a meeting, it turned over to MLB a binder containing confidential business information related to this content, which MLB and its related entities subsequently used to develop a competing product. The binder was returned to BLA and the relationship between BLA and MLB ceased shortly thereafter, resulting in MLB suing BLA.
In its amended answer, BLA asserted counterclaims for misappropriation of trade secrets and wrongful competition. BLA also asserted a counterclaim for conversion based on MLB’s allegedly unlawful retention and use of the information contained in the binder. MLB moved to dismiss only the counterclaim for conversion. The Court framed the issue in the following terms: “[W]hether intangible property (here, confidential business information) allegedly improperly used by defendant may give rise to a cause of action for conversion if, at the same time, plaintiff had complete and unfettered use of its property.”
The Court’s answer was a resounding “No”, based largely on the Court’s reading of Thyroff v. Nationwide Mut. Ins. Co., an earlier Court of Appeals’ decision recognizing a cause of action for conversion of electronic records stored on a computer held by Nationwide. Crucial to the Court’s analysis were subsequent New York County decisions dismissing conversion claims under Thyroff, where the plaintiff was not deprived of its ownership rights in the converted property. The Court also relied on State v. Seventh Regiment Fund, Inc., a 2002 decision in which the Court of Appeals reaffirmed that “denial of access to the rightful owner” has always been a necessary element of conversion. In contrast to these cases, MLB returned the binder to BLA, and BLA was free to do as it wished with its information. BLA’s counterclaim for conversion was therefore dismissed.
Not all New York courts read Thyroff so narrowly. In New York Racing Assn. v. Nassau Regional Off-Track Betting Corp., for example, another Commercial Division allowed an action for conversion of a live audio-visual simulcast, even though the plaintiff was not “excluded” from access to the electronic data transmission. In so holding, Justice Bucaria noted that, “[i]n Thyroff, the Court of Appeals suggests that plaintiff may maintain an action for conversion where its electronically stored data is misappropriated, regardless of whether plaintiff has been excluded from access to its intangible property.” (Emphasis added.)
In sum, when asserting conversion of intangible property rights, New York County practitioners should carefully consider whether the claimant was ever deprived of its property. If not, resort to “trade secret” protections may be required. However, as the Court noted, just as “trade secret” misappropriation does not always qualify as conversion, not all intangible property qualifies as a “trade secret.”