The court, however, declined to dismiss a misappropriation of trade secrets claim after rejecting the defendant's argument that the draft grades were opinions and thus not eligible for trade secret protection. That argument tries to apply defamation precedent to a trade secret claim, the court said. The court said a trier of fact must determine whether reasonable efforts were made to keep the draft grades secret.
The report takes into consideration both objective factors, such as players' injury history, family background, and college statistics, and subjective factors that measure a prospect's intangible attributes. The report ultimately assigns each player a numerical grade that represents National's estimate of the player's likelihood of success in the NFL.
Robert Rang is a part-time sports writer who publishes articles about the NFL draft for a website operated by Sports Xchange. Between 2010 and 2011 Rang wrote eight articles that included 18 of National's players grades. Rang subsequently ignored several cease-and-desist letters that were sent by National.
National filed a lawsuit against both Rang and Sports Exchange asserting claims of copyright infringement and trade secret misappropriation. Rang and National both moved for summary judgment.
“National's Player Grades, unlike telephone numbers, are not facts; they are 'compilations of data chosen and weighed with creativity and judgment,' ” Judge Ronald B. Leighton said, quotingCDN Inc. v. Kapes, 197 F.3d 1256, 53 USPQ2d 1032 (9th Cir. 1999). The court added:
The Player Grades represent National's opinion, based on its data and its expertise, of a player's likely success in the NFL. Rang does not claim (and no evidence supports) that National uses a basic formula to arrive at its Player Grade. Thus, the element of creativity has not been removed. The undisputed evidence shows National arrives at its grade through a weighing of subjective factors, such as personal character, leadership, and poise.
After determining that the grades were protected by copyright the court turned its attention to Rang's fair use defense.
The first factor, which asks whether the accused work has transformed the copyrighted material, weighed “strongly in favor of finding a fair use,” the court said. It reached this determination after applying the three factor test that the U.S. Court of Appeals for the Ninth Circuit articulated in its recent decision in Monge v. Maya Magazines Inc. 688 F.3d 1164, 103 USPQ2d 1907 (9th Cir. 2012) (159 PTD, 8/17/12).
Monge said that a determination of whether a new work adds something new to the original work will be dependent on the following three principles: (1) news reporting; (2) transformation; and (3) commercialism.
Monge, after applying those three principals, determined that a tabloid magazine's publication of images from a celebrity couple's clandestine wedding ceremony was not a transformative use. Specifically, the Ninth Circuit held that the story itself--that two celebrities were married in secret--was not sufficiently newsworthy to absolve a newspaper from infringement liability for the publishing of photos depicting the event. The appeals court also took issue with the minimal transformation that the newspaper did to each photo, and the fact that the images were used for commercial reasons.
National argued that its player grades, like the photos in Monge, were not newsworthy. The court declined to make a determination on newsworthiness, but said, “In any event, whether the Player Grades are newsworthy is only one part of the factor that the court considers.” When all of the Monge factors are weighed it is clear that Rang's use was transformative, the court concluded.
With respect to the second Monge factor, the court said, “Rang took material in the public domain, the player grades, and his original thoughts to create his original commentary on the players.” Moreover, “Rang did not publish a wholesale list of the Player Grades; instead, he recited a grade and provided original commentary on the players and their draft prospects in his view,” the court said.
The court also rejected National's argument that Rang acted in bad faith. That argument was premised on Rang's failure to respond to the cease and desist letters. “However, if Rang was entitled to protection under fair use, the letters add nothing to the analysis because Rang would have been entitled to ignore them,” the court said.
On the balance, the court determined that the articles were highly transformative and thus that this factor weighed in favor of a fair use finding.
National argued that the third fair use factor, the amount of work infringed, weighed in its favor. Though it conceded that Rang had only infringed a small percentage of its entire work, it argued that that small percentage constituted the “heart” of its work. The court was not persuaded.
“Even if the Player Grade is the most valuable part of the Scouting Reports, Rang took a small portion of the most valuable part,” the court said. It added, “The player grades mean little without the context of the other grades to show where a player ranks.” Furthermore, the court noted that the player grades were not the focal point of Rang's stories. It determined that this favor “weighs slightly in Rang's favor.”
The final factor also weighed in favor of a finding of fair use, the court held. The court quoted Monge for the proposition that “The effect on the market is 'undoubtedly the single most important element of fair use.' ” This being the case, the court noted that the scouting reports and Rang's articles competed in “completely separate markets.” The reports are sold exclusively to professional football teams whereas Rang's articles are marketed towards the public, the court said.
Furthermore, that some of National's competitors could see the player grades in Rang's articles does not impact the market, the court said. “Even if National's direct competitors saw some player grades in Rang's articles, no evidence suggests that the competitor would be able to obtain a comprehensive picture of National's Scouting Reports,” the court said. “The undisputed facts demonstrate that Rang's online articles are transformative and do not decrease the market value for National's Scouting Reports,” the court concluded.
After balancing all of the relevant factors, the court determined that Rang's use of the player grades constituted fair use. It thus granted Rang summary judgment on the copyright infringement claim.
Rang argued that the grades were opinion, and thus not a protectable form of “information.” The court said that this argument was misplaced. Free speech concerns require that there be a legally operative distinction between fact and opinion in defamation cases but “this is not a defamation case, and First Amendment protection will not 'vanish' for opinions in a defamation cases if the player grade is given protection as a trade secret,” the court said.
The court noted that Washington courts have not addressed whether an opinion can be a protectable trade secret under the Uniform Trade Secrets Act. However, the court determined that it need not reach a determination on that matter in this case. The information that National is seeking to protect as a trade secret is not the player grades themselves, but rather the fact that it issued player grades in the first place, the court said.
“[T]he fact that National has assigned a Player Grade to a certain player is not an idea or opinion,” the court said. It added, “Because the fact that National assigned a certain Player Grade is information, whether the grade is protected under trade secret law is a question for the trier of fact.”
The court said factual disputes existed as to whether reasonable secrecy was used to protect the information, and as to whether the secrecy of the grades contributed to their economic value. Accordingly, the court declined to grant either party summary judgment with respect to the trade secret claim.
National Football Scouting Inc. was represented by E. Calvin Matthews IV of Guilfoil Petzall & Shoemake, St. Louis. Rang was represented by Douglas Clayton Berry of Graham & Dunn,. Seattle.
By Tamlin H. Bason
Opinion at /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/nfl(1).pdf
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