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Experian Information Solutions, Inc. v. Nationwide Marketing Services Inc.

United States Court of Appeals, Ninth Circuit

June 27, 2018

Experian Information Solutions, Inc., Plaintiff-Appellant,
v.
Nationwide Marketing Services Incorporated, Defendant-Appellee.

          Argued and Submitted December 6, 2017 San Francisco, California

          Appeal from the United States District Court for the District of Arizona Steven Paul Logan, District Judge, Presiding D.C. No. 2:13-cv-00618-SPL

          Robert Unikel (argued), Arnold & Porter Kaye Scholer LLP, Chicago, Illinois; Max Gavron, Oscar Ramallo, and Rhonda R. Trotter, Arnold & Porter Kaye Scholer LLP, Los Angeles, California; for Plaintiff-Appellant.

          Mark A. Fuller (argued) and Christopher W. Thompson, Gallagher & Kennedy P.A., Phoenix, Arizona, for Defendant-Appellee.

          Marcella Ballard, Venable LLP, New York, New York; Emilio W. Cividanes, Venable LLP, Washington, D.C.; for Amicus Curiae The Direct Marketing Association Inc., D/B/A The Data & Marketing Association.

          Before: Mary M. Schroeder and William A. Fletcher, Circuit Judges, and Sara Lee Ellis, [*] District Judge.

         SUMMARY [**]

         Copyright

         The panel affirmed in part and reversed in part the district court's summary judgment in favor of the defendant in a copyright case.

         Plaintiff Experian Information Systems, Inc., compiled the ConsumerView Database, which contains more than 250 million records, each pertaining to an individual consumer. The database includes compiled pairings of names and addresses.

         Affirming in part, the panel held that the name and address pairings were copyrightable as compilations but were entitled only to limited protection under the copyright laws. The panel held that Experian failed to show that its copyright was infringed because it did not establish a bodily appropriation of its work.

         Reversing the district court's grant of summary judgment on a state law trade secret claim, the panel held that, if proper safeguards were maintained, then Experian's lists could be protected as trade secrets under Arizona law. The panel concluded that there were triable issues of fact as to the defendant's knowledge of misappropriation. The panel remanded for further proceedings on the trade secret claim.

          OPINION

          SCHROEDER, Circuit Judge:

         The novel federal question in this appeal is whether lists of names with addresses are copyrightable when they are the product of a sophisticated process to ensure accuracy and utility. In other words, whether such lists are more like a telephone book, that the Supreme Court has held lacks any creative spark, or more like Joyce's Ulysses that changed the course of 20th century literature. The answer, it turns out, lies somewhere in between, but closer to a telephone book. The name and address pairings are only entitled to limited protection under the copyright laws. If proper safeguards are maintained, the lists may also be protected as trade secrets. We hold in this case that the Plaintiff, Experian Information Solutions, Inc., ("Experian"), established that its lists were copyrightable but failed to establish that its copyright had been infringed. We therefore affirm the District Court's summary judgment in favor of the Defendant, Nationwide Marketing Services, Inc., ("Natimark"), on the copyright infringement claim, but reverse the state law trade secret claim and remand it for further proceedings.

         Factual and Procedural Background

         Experian is in the business of compiling databases and licensing portions of them to companies for use in their marketing campaigns. Since 1998, it has compiled what is now known as the ConsumerView Database ("CVD") that has a copyright registration for the "selection, coordination, arrangement and compilation of data . . . ." The CVD contains more than 250 million records, each pertaining to an individual consumer, and includes hundreds of "fields," each denoting a particular attribute of the consumer, such as age, earnings, or purchase habits, as well as behavior predictions. This litigation concerns compiled pairings of names and addresses. These represent one of the most lucrative components of the CVD, because mail marketers pay substantial amounts for licenses to utilize Experian's name and address pairings. The value, according to Experian, results from the process by which Experian determines the accuracy of its pairings and the utility of the selection of the pairings it includes in the CVD for its marketing clients.

         Experian obtains its name and address data from a variety of sources, such as catalogue purchase data, cable company records, real estate deeds, and warranty cards signed by consumers at retail stores. For its database, Experian picks from roughly 2, 200 public and proprietary sources that it believes have reliable, value-adding data. In determining whether to include a new source in its database, Experian runs the source through tests to measure the potential new data's quality and to identify the differences between the new source's data and existing data in the CVD. Experian's employees review the test results and do not add any data to the CVD until they approve the source. Even if a source is validated, however, not all name and address data are added to the CVD. Experian excludes name and address pairings it believes are not valuable to its clients. Excluded are business addresses and addresses of individuals in prison and the very elderly.

         Experian also resolves conflicts between data sources. Such conflicts are resolved utilizing thousands of "business rules" or algorithms to analyze data from each source and determine which name and address pairing should be included in the CVD. The data must be kept current, and the business rules are regularly updated on the basis of client feedback. Experian estimates that it expends more than $10 million annually to compile and update the CVD.

         Experian is not alone in the database compiling industry. There are at least four other major compilers. Their respective methodologies also yield lists, but according to Experian, the lists have material differences in content.

         Defendant Natimark is a smaller and more recent addition to the consumer database compilation industry. It is located in Phoenix, Arizona. In 2011 it acquired a database, the National Consumer List ("NCL") in order to resell the data. The NCL has data for approximately 200 million consumers.

         The seeds of this litigation were sown in April 2012 when a data broker acting on behalf of Natimark attempted to sell Experian a data compilation of children's birthdays, coupled with the name and address pairings of their parents. When Experian tested the name and address pairings in the sample the data broker provided, and compared them with Experian's own CVD pairings, Experian found a match rate of more than 97%, leading it to suspect that the data had been stolen. Experian's expert later compared Natimark's pairings with Experian's and found similar match rates of approximately 94%. Also suggesting stolen data was the price Natimark paid for the data which, according to Experian, was unusually low and unaccompanied by a customary written agreement with industry-standard restrictions on maintenance and use.

         After confronting Natimark with its conclusion that the data had been copied, Experian filed this action in March 2013 in the U.S. District Court for the District of Arizona claiming copyright infringement. When the District Court ruled that the allegedly-infringed pairings were not copyrightable, Experian added a claim for trade secret misappropriation, and argued that the pairings were trade secrets that had been stolen. The District Court granted summary judgment for Natimark, holding that Experian did not have a valid copyright or trade secret in its compilation of names and addresses. The court held that the compilation of pairings lacked sufficient creativity or originality to merit copyright protection. It similarly held that the pairings of names and addresses could not ...


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