A California federal judge tossed the trade secret claims made by Top Agent Network Inc. against rival Zillow Inc.

The judge granted Zillow’s motion to dismiss all but one of Top Agent’s claims. One breach of contract claim remains.

Both parties are sources of online real estate information. Top Agent alleged that Zillow defrauded it into divulging proprietary information about Top Agent’s “Upcoming Listings” feature.

The feature organizes and disseminates information about off-market properties. Top Agent alleged that Zillow used this information to develop its own competing feature.

As discussed by the court, Top Agent is a private online community and website available to only the top 10% of real estate agents in the markets served. The “Upcoming Listings” feature allows members to share information about properties that have not yet appeared on the Multiple Listing Service (MLS) and those that will not be listed.

The court noted that the concept of “Upcoming Listings” is not novel and that agents selectively share such information with each other without the use of the Top Agent site.

Top Agent claimed, however, that “its particular strategy and system for aggregating such information is unique and took years to hone.”

Non-Disclosure

In February, 2014, Top Agent’s Chief Executive Officer contacted Zillow’s Chief Revenue Officer about a potential investment by Zillow in Top Agent.

On a call, Zillow’s executive assured Top Agent’s executive that all information provided by Top Agent to Zillow would be kept confidential and used by Zillow solely to evaluate a potential investment. The Zillow executive also said that he intended to sign a nondisclosure agreement (NDA).

After this call, Top Agent provided Zillow with access to its member-only content, including the “Upcoming Listings” feature.

Zillow later told Top Agent that Zillow would not be making the contemplated investment.

In June, 2014 Zillow launched its own “Upcoming Listings” feature. According to Top Agent, this Zillow offering contained all the core features of the Top Agent offering.

The Lawsuit

Top Agent sued Zillow in October 2014, alleging causes of action including:

  • misappropriation of trade secrets under California’s Uniform Trade Secrets Act (CUTSA)
  • misappropriation of ideas
  • breach of confidence

Zillow moved to dismiss most of the causes of action.

The court dismissed Top Agent’s trade secret claims because Top Agent failed to plead the existence of trade secrets with sufficient specificity.

The court noted that:

trade secret laws do not protect “ideas,” or “conceptual” data, but rather facts, or “empirical data” — “such as the customer’s preferences, or the location of a mineral deposit”… It is far from clear that the “features” and “strategy” to which the complaint vaguely refers are comprised of empirical data, protectable under CUTSA, rather than ideas or functions, which are not.

The case is Top Agent Network, Inc. v. Zillow, Inc.

Protecting Ideas

The case illustrates the challenges of protecting a business “idea” from use by others, even when the idea is revealed subject to an NDA. A business idea that rises to the level of an “invention” can be protected via a business method patent, but these types of patents are increasingly challenged in the courts.

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