The US Court of Appeals for the Eighth Circuit addressed the copyright protection afforded to an information database and whether comments made to a reporter while litigation was ongoing violated the disparagement clause in a separation agreement. Ultimately, the Court affirmed a judgment against the defendant for copyright infringement and against its founder for breach of contract. In doing so, the Court upheld the findings that plaintiff’s database copyright was valid, even though it was only entitled to a narrow scope of protection, and that the defendant’s founder’s comments to a reporter violated his contract with the plaintiff. Infogroup, Inc. v. DatabaseUSA.com LLC, Case No. 18-3723 (8th Cir. Apr. 27, 2020) (Benton, J.).
Both Infogroup and DatabaseUSA compile business information into databases. Infogroup founder Vinod Gupta left Infogroup in 2008 and later created the competing DatabaseUSA. Gupta’s separation agreement with Infogroup provided him with $10 million in exchange for his agreement to non-disparagement and confidentiality clauses. In 2014, Infogroup sued DatabaseUSA and Gupta for copyright infringement and breach of contract, respectively.
At the district court, the jury found for Infogroup on the copyright infringement claim and the breach of contract claim, awarding Infogroup $21.2 million in damages—$11.2 million dollars from DatabaseUSA and $10 million from Gupta. DatabaseUSA and Gupta appealed.
Copyright infringement requires that the plaintiff prove that (1) it owns a valid copyright, and (2) the defendant copied original elements of the copyrighted work. DatabaseUSA challenged Infogroup on the first requirement, arguing that Infogroup did not have a valid copyright because, as a mere compilation of facts, the database lacked the creativity necessary for copyright protection. DatabaseUSA argued that Infogroup had not fulfilled the second requirement because it failed to show that DatabaseUSA copied original elements of Infogroup’s database, and could not show actual copying without submitting its entire database for comparison.
Acknowledging that “copyright in a factual compilation is thin,” the Eighth Circuit nonetheless held that a reasonable juror could have concluded that Infogroup’s database contained the necessary “minimal degree of creativity” through its selection and arrangement of the facts in its database. Notably, Infogroup submitted into evidence its copyright registration for the database, which was entitled to a rebuttable presumption of validity.
The Eighth Circuit relied on three things in assessing whether DatabaseUSA had copied Infogroup’s work:
- Testimony from a salesperson who had worked for both Infogroup and DatabaseUSA that DatabaseUSA’s executives had told him that there were no changes between Infogroup’s and DatabaseUSA’s data
- Evidence that DatabaseUSA’s database contained Infogroup’s “seed data” (fake data that Infogroup included in its database to catch infringers)
- The district court’s sanction against DatabaseUSA for intentionally destroying its allegedly infringing database, which resulted in a spoliation instruction to the jury that it should infer the destroyed database contained facts unfavorable to DatabaseUSA.
It was this third fact that negated DatabaseUSA’s arguments with respect to copying. Without DatabaseUSA’s database for review, there was no need to review Infogroup’s full database for comparison, and the inference that DatabaseUSA’s database contained the copyright-protected original elements of Infogroup’s database was permissible per the spoliation instruction.
The Eighth Circuit also upheld the award against Gupta for breach of the non-disparagement and confidentiality provisions in his separation agreement. Infogroup submitted evidence showing that Gupta had told a reporter “The problem with Infogroup is they cannot compete in the marketplace. They have no leadership, no brains and their product is obsolete.” Gupta argued that these comments did not breach the contract because they fell within the exception for “comments made during a legal or administrative investigation or proceeding.” The Court, however, noted that a reasonable juror could interpret this exception to apply only to statements made during the actual investigation or proceeding, rather than simply during the timeframe that the litigation was ongoing. The Court noted that the finding that Gupta had breached the non-disparagement clause was therefore reasonable. Moreover, Infogroup’s evidence that Gupta used Infogroup’s customer lists and trademarks was sufficient for a reasonable juror to have found that Gupta violated the confidentiality clause, which prohibited “use of highly sensitive and proprietary information,” including Infogroup’s “trademarks and customers.”