New York law recognizes a cause of action for misappropriation of ideas, but it is not an easy claim to establish. This cause of action requires proof of two elements: (1) a legal relationship between the parties in the form of a fiduciary relationship, express contract, implied contract, or quasi-contract; and (2) an idea that is novel and concrete.
The idea must be truly novel. An idea that is merely “a variation on a basic theme” already in the public domain is not novel.
Under New York law, as applied by its Federal courts, there are two separate types of misappropriation of ideas cases – non-contract and contract based claims. Where the claim is not based on a contract, the idea at issue must be original and novel in absolute terms. This is so because unoriginal, known ideas have no value as property, and the law does not protect against the use of that which is free and available to all. Claims based upon a contract or quasi-contract require only a showing that the disclosed idea was novel to the buyer.
Novelty is generally a fact issue, but sometimes an idea may be so unoriginal or lacking in novelty generally that the court can determine that as a matter of law, the buyer is deemed to have had knowledge of the idea. In such cases, neither a property-based nor a contract-based claim exists.
Under New York law, as applied in State courts, absolute novelty is requisite for both contract and non-contract based claims. However, the novelty of an idea need not be demonstrated in order to establish a claim for breach of contract where, subsequent to disclosure of the idea, the parties entered into a contract for use of the idea. The reasoning is that the buyer, by entering into a contract, has demonstrated its agreement that the idea has value. Thus, a contract based claim can proceed even if the idea lacks novelty.
The mere formation of a contract in a submission-of-idea case does not necessarily mean that the contract has been breached by the defendant upon his use of the idea. Under New York law, in order to recover for breach of contract in a submission-of-idea case, a plaintiff must demonstrate some nexus or causal connection between his or her disclosure and the defendant’s use of the idea. In essence, where there is an independent source for the idea used by the defendant, there may be no breach of contract claim.