Document Security Systems Inc. v. Coupons.com Inc.

6:11-cv-06528
October 24, 2011
Federal Court
New York
United States District Court for the Western District of New York

On July 13, 2012, the US District Court for the Western District of New York gave notice to the parties in Document Security Systems, Inc. (DSS) v. Coupons.com rescheduling the motions hearing set for October 9th, 2012 . Motions will now be heard on August 16th regarding DSS’s October 24, 2011 claims against Coupons.com for breach of contract, misappropriation of trade secrets, unfair competition and unjust enrichment. Specifically, DSS is a cloud-computing data integration company specializing in anti-counterfeiting, authentication, and mass-serialization technologies. The lawsuit alleges that Coupons.com misappropriated DSS’s proprietary digital copy protection technology, using said technology in their coupons without authorization. The business relationship between DSS and Coupons.com was centered around DSS’s secret “Blockout” technology that when placed onto an image, will render a print-out of the image unable to be copied or scanned by high-end electronic devices (Complaint ¶ 2). Coupons.com representatives signed non-disclosure agreements and were shown three kinds of DSS security technology including the proprietary Blockout software, for the purposes of “evaluating a potential business relationship (Complaint ¶ 24; quoting 2005 NDA ¶ 3). DSS alleges in its complaint that Coupons.com used the proprietary Blockout software in their digital coupons without paying for or being granted rights to commercial use of their proprietary product in any contract or otherwise.
In response, Coupons.com’s motion to dismiss filed early December 2011 argues that DSS’s trade secrets misappropriation and unfair competition claims must be dismissed as duplicative of the breach of contract for violation of the non-disclosure agreement. Furthermore, Coupons.com does not specifically deny violation of its NDA with DSS or use of the DSS Blockout software in its coupons, but instead asserts that the other claims must be thrown out under New York law. Citing Clark-Fitzpatrick, Inc. v. Long Island Railroad Co., Coupons challenges DSS’s tort claims arising from an alleged breach of contract, because DSS did not plead an independent legal duty extraneous to the contract. In other words, Coupons.com defends that without any further contractual obligation, they are liable only for damages arising under violation of the existing non-disclosure agreement.
Undoubtedly the Western District Court expedited the hearing schedule on this matter lay in anticipation of Coupons.com pending method patent (granted on July 17th) for a “System and Method of Augmenting Content in Electronic Documents with Links to Contextually Relevant Information. ” Such a patent will allow for the digitization of Coupons.com on handheld electronic devices for use by consumers, essentially eliminating the need the printable coupons and their electronic protections (like the DSS Blockout software). However, Coupons.com recent announcement of its new merchant self-service “Brandcaster Retail” coupon e-platform may imply Coupons.com continuing need for digital copy protection technology like the DSS Blockout software . Thus while early settlement was at one time possible, October 2012 mediation sessions failed to amicably settle the relevant and substantive legal issue of whether Coupons.com’s sole breach of their non-disclosure agreement with DSS (by way of unauthorized commercial use the Blockout software) bars subsequent trade secret misappropriation claims under the same cause of action. As such, the case is currently in pre-trial discovery posture as both parties adhere to the discovery schedule outlined by Hon. Marian W. Payson on December 12, 2012.

Document Security Systems Inc.
Coupons.com Inc.
Other state statute

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